Analysis
This analysis charts how casualty ILS is moving from a handful of blueprint deals into a fast-expanding marketplace. We show how a widening investor pool is sharpening competition for transactions, why cedants are pursuing protection and fee income rather than asset-side returns, and where aggressive leverage and private credit exposure are starting to raise red flags. It delivers fast insight on how custom deal terms are being negotiated, the role of fronts in unlocking investment committees, and what could accelerate or constrain growth from the segment's current ~$2bn base.
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The casualty ILS space is in a healthy discovery phase after a first wave of deals provided some early blueprints for parties looking to transact, according to speakers at Insurance Insider’s recent New York conference.
The potential pool of investors is expanding, with interest from pension funds, endowments and sovereigns working with ILS managers, and from private credit and private equity firms targeting direct bespoke deals.
Paschal Brooks, managing director at Aon Securities, said: “The number of people who engage, sign an NDA and want to see the transaction has grown over the past year.”
This has led to competition for deals, with investors using levers including commissions and asset strategies as negotiating points.
“Rather than pushing to pay a higher ceding commission they may propose a more conservative asset portfolio,” Brooks said.
Cedant side, interest is rising particularly among reinsurers targeting retrocession deals, with speakers noting that existing casualty retro markets are thin-to-non-existent.
The consensus was that cedants’ primary motivation for transacting is to secure protection, and not to sidestep their own investment guidelines to access juicier investment returns.
Bob Forness, CEO at MultiStrat, said: “Cedants are looking to generate fee income alongside risk income."
Ben Canagaretna, managing director for corporate advisory and solutions at Acrisure, added he had “not seen cedants looking for exposure to private credit, per se”.
They are looking to improve return on equity for their company, he said.
Customised structures match cedant and investor
Aaron Slan, managing director at Culpeper Capital Partners, noted that broadly, deals have priced on the basis of around a 90% combined ratio to the investor.
Culpeper has been active in the casualty ILS space this year, including as one of the backers of QBE Re’s casualty reinsurance vehicle George Street Re.
Slan said his firm favoured deals with a small underwriting profit, matched with a single A, asset-backed securities, all-liquid investment portfolio.
"With 2.5x leverage that gets you high teens [returns]. If you have a diversified portfolio, that’s where we’d like to play,” Slan said.
He noted that some investors could target returns in the high 20s or 30s and will take more risk to get there.
There were deals being offered in the market with combined ratios of 100%-plus, leverage of 5x-plus, “and allowing for a ton of private credit”, Slan said.
“In theory, you can make those numbers work if you are getting 8%-9% on a large private credit book at that leverage. That just feels dangerous. Only something needs to go wrong on one side for it to blow up," Slan said.
Meanwhile, Forness said there are ways to “make room for a little more structured product”. This could include building buffers into the deal to reduce the risk of calls on the fund.
“It all comes down to the custom structure, and the investor’s appetite,” Forness said.
Brooks observed that “private credit is a very broad term”, which includes consumer credit (credit cards, auto loans), direct business lending, private equity or middle market, and asset-backed financing whether infrastructure or other heavy assets.
The broker added that deals can be structured whereby private credit is a larger portion of the asset strategy at the outset, becoming a smaller portion in later years.
Additionally, Slan noted that private credit loans are generally three-to-seven-year deals, and cashflow generating.
A role for fronts
Canagaretna said one way to help carriers’ investment committees to get more comfortable with deals is to add a front into a transaction.
It helps “because there is a reliance on the front’s rating, rather than the investor’s investment strategy,” he said.
Slan also outlined that the risk level in the investment strategy forms part of the overall evaluation and negotiation on a deal.
Cedants may add more collateral requirements if the asset strategy involves investing in a riskier way, or lower it for a lower-risk investment portfolio. "Those are the dials, you want to match cedant and investor,” he said.
Speakers agreed that there has not yet been standardisation of structures, as the casualty ILS niche is still in its early innings.
Additionally, each deal is evaluated as a whole package, with the leverage, investment portfolio and underlying book of business all playing into how it gets designed.
“There will probably be a few different ways it gets done, given how varied the casualty-specialty market is,” said Slan.
He noted there could be groupings of structures with similarities where some standardisation emerges.
Slan also argued there has been a degree of standardisation in the duration of deals at seven years, as reserves need to be reasonably well seasoned before there can be a valuation for exit purposes.
He said: “Reserves need to be sufficiently developed so the [commutation] premium doesn’t take away all of the returns. The easiest way is to transfer what’s on the books, plus the commutation premium.”
This means “documentation has to be buttoned up”, Slan added, because the people involved in the original deal may have moved on.
Looking ahead, speakers anticipated segment growth, with committed capital reasonably expected to double each year for the next several years, from a currently small base of ~$2bn.
The outlook for an active M&A market for balance sheet (re)insurers was raised as a potential factor limiting casualty ILS growth.
Negotiations on a casualty ILS transactions can take 12 to 18 months, with Slan noting M&A in the carrier space “has slowed some discussions”.
By Liz Bury
05 May, 2026
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