The recent growth trend in the alternative reinsurance capital market is forecast to persist into 2026, as supply of capital from investors and demand from sponsors seeking risk transfer remain robust, Fitch Ratings has said.The rating agency also notes how alternative capital and insurance-linked securities (ILS) market growth has resumed in sidecars as well as catastrophe bonds, while capital provided to retrocession opportunities has also served to moderate pricing as well.Capital levels in the insurance-linked securities (ILS) market has reached new highs so far in 2025, especially thanks to the record levels of activity in the catastrophe bond market, as well as the launch of new reinsurance sidecar vehicles, Fitch explained in a new report.Returns in the sector remain attractive and also attracting capital is the fact discipline has been maintained on all-important terms of deployment, such as attachment points.

Abundant capacity from both traditional and alternative markets has pressured pricing in the upper-layers of property catastrophe reinsurance towers, but higher attachment points and retentions generally held, while the market has begun to support more aggregate and subsequent event covers.Some ventured lower-down, although so far capital has not pressured lower-layer property cat to any meaningful degree.But the rating agency highlighted retrocession as one area where greater pressure on pricing has been seen.

“The pricing decline reflects robust retro capital supply from both the ILS market, particularly catastrophe bonds, and traditional reinsurers, as retro losses were minimal in 2024 and return expectations remain high,” Fitch explained.Importantly, Fitch notes that the ILS market has been filling some gaps in the risk tower, which positions alternative capital to become even more important to ceding companies.The rating agency said that, “The active ILS sector has more than offset reduced allocations from some traditional reinsurance carriers.” Both catastrophe bond and total alternative capital have reached new high levels, Fitch said.

“In addition to catastrophe bonds, the market benefitted from growth in sidecars, both in property catastrophe and in non-catastrophe, including casualty risk,” Fitch said.Fitch also noted that as well as investor appetite for insurance-linked opportunities, there is also significant demand for protection and complementary risk capital from the insurance and reinsurance community, which together will fuel growth.“Fitch expects strong alternative reinsurance capital market growth to persist into 2026, as both investor supply and sponsor demand remain robust,” the rating agency concluded..

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