Alternative reinsurance capital hit new $115bn high at end of 2024: Aon
The amount of alternative capital from insurance-linked security (ILS) and third-party investor sources in the global reinsurance market grew by 7% in 2024, to end the year at a new high of $115 billion, according to Aon’s Reinsurance Solutions.
When Aon last reported on alternative and ILS capital in the reinsurance market, the figure was $113 billion as of the end of September 2024.
Meaning the ILS capital base expanded by almost a further 2% by the end of the year and given the strong activity levels seen in catastrophe bonds in particular in the first-quarter of 2025, we suspect that the figure will be higher again by this time.
Aon cited catastrophe bond market inflows as a key driver of the rise in alternative reinsurance capital through 2024.
In our just-published new Q1 2025 catastrophe bond market report, we show that capital supporting issuances far outpaced maturities again resulting in market growth of around $2.7 billion just in that period. Add in any growth on the private ILS and collateralized reinsurance side, and it’s safe to assume Aon’s figure will be higher again for the end of Q1.
In its reinsurance report that has been published today, Aon said, “Alternative capital is estimated to have reached a new high of $115 billion at the end of 2024, up $7 billion in the year, with attractive market conditions encouraging existing participants to reinvest profits and new entrants to commit funds.
“Increased investor appetite has allowed many traditional reinsurers to expand their sidecar and/or catastrophe bond programs, enabling the deployment of additional capacity.”
The reinsurance arm of the broker added, “Aon estimates that global reinsurer capital rose by $45 billion to $715 billion over the course of 2024, driven primarily by retained earnings and new inflows to ‘sidecar’ structures and the catastrophe bond market. The total was unchanged in the fourth quarter, driven by the earnings impact of Hurricane Milton and strengthening of the U.S. dollar.
“Aon estimates that equity reported by global reinsurers rose by $38 billion to $600 billion over the course of 2024, continuing the recovery seen since 2022. The primary drivers have been strong earnings, following the market ‘reset’ in 2023, and the reversal of unrealized losses on fixed-income securities, due largely to the “pull-to-par” effect. Growth has been partly offset by increased capital returns to investors, as reinsurers look to reward loyalty.”
As we said, continued growth in alternative capital is to be expected, not least given the very strong levels of activity in the catastrophe bond market.
But growing demand for protection is also a key driver as well, alongside the increasing use of third-party capital structures such as sidecars.
Aon concluded in its report, “Growth of alternative capital continues to outpace that of traditional, creating new and diversified sources of capital for protection buyers, and an ever-growing suite of opportunities for investors to gain access to uncorrelated insurance risks across the broader property and casualty market.”
