Aon Pegs ILS Market at $144.5B as AI Adoption and Niche Government Programs Signal New Risk Frontiers
By The Reinsurance Daily Editorial ·
Aon Pegs ILS Market at $144.5B as AI Adoption and Niche Government Programs Signal New Risk Frontiers
Aon Reports ILS Capital Reaches $144.5bn, Citing Foundational Role
Insurance-Linked Securities (ILS) capital has reached a new high of $144.5 billion, cementing its structural importance in the global reinsurance market. According to a new report from **Aon**, this figure represents a $3.5 billion increase during the second quarter of 2026 alone, up 2.5% from the $141 billion recorded at the end of Q1. The growth demonstrates robust investor demand and the asset class's recovery and expansion following recent loss years. The five-year compound annual growth rate (CAGR) for ILS now stands at an impressive 8.3%, significantly outpacing the 4% CAGR of the traditional reinsurance capital base over the same period. This divergence underscores the strategic allocation by capital providers towards ILS instruments for accessing property catastrophe risk. Aon's analysis positions this capital not as transient or opportunistic, but as a permanent and essential component of the industry's capital structure.ILS capital is now seen as “foundational” to the reinsurance market, and its growth continues to be a major factor in the supply/demand balance.
Resolute Global Partners Advocates for Blended Reinsurance Portfolios
As an alternative to pure-play ILS funds, **Resolute Global Partners** is promoting a blended portfolio strategy that combines different reinsurance structures. The firm, which manages approximately $2.85 billion in assets, argues this approach offers investors superior risk-adjusted returns by diversifying beyond property catastrophe risk. By integrating various instruments, from traditional reinsurance contracts to collateralized vehicles and cat bonds, the strategy aims to optimize capital deployment across the risk-reward spectrum. The firm is reportedly targeting close to $3 billion for a new fund employing this blended model, signaling investor appetite for strategies that can mitigate the volatility inherent in single-peril ILS funds.JD Power Finds 42% of P&C Customers Comfortable with AI for Claims
Consumer acceptance of Artificial Intelligence in personal lines insurance is accelerating, creating both opportunities and new operational risks for carriers. A **JD Power** study reveals that 42% of auto and home insurance customers are now comfortable interacting with AI for claims processing. Acceptance varies by function, with 37% comfortable using AI for service interactions and a lower 29% for the initial purchase of a policy. This increasing comfort level is pressuring carriers to integrate AI to manage costs and improve efficiency within a US personal lines market that generates over $200 billion in annual premiums. The data indicates that carriers who successfully deploy AI in claims and service stand to gain a competitive advantage, while laggards risk falling behind in customer satisfaction and operational expense ratios.Delaware Deploys $85,355 in Grants to Boost Exporter Insurance Coverage
A state-level initiative in Delaware highlights a micro-trend of public-private partnerships designed to close insurance gaps for small businesses. Through its State Trade Expansion Program (STEP), **Delaware** has awarded $85,355 in grants to 117 small and medium-sized enterprises to subsidize the cost of activities that boost foreign sales, including export credit insurance. Individual firms can receive up to $10,000. Analysis of the program shows a strong return on investment, with every $1 of grant funding historically generating a 48% increase in export revenues for the participating companies. This model demonstrates a targeted government intervention to de-risk international trade for smaller entities, creating insurable interest where it might otherwise be cost-prohibitive.Key Takeaways
- The $144.5 billion ILS market (Aon) is forcing product innovation, evidenced by Resolute Global Partners' push for blended portfolios. The sheer scale of alternative capital is creating direct competition for traditional reinsurers and compelling ILS managers to diversify beyond pure property cat risk to maintain target returns.
- With 42% of consumers comfortable with AI for claims (JD Power), underwriters must intensify scrutiny of cedents' AI governance and E&O coverage. A systemic flaw in a carrier's claims algorithm represents a new, potentially correlated liability risk that must be explicitly addressed in casualty reinsurance renewals.
- While Delaware's export grant program is small ($85,355 in grants), its model of subsidizing insurance could be replicated for larger, more systemic risks like climate or cyber. This poses a long-term risk of government intervention crowding out private market solutions or distorting pricing for risks that are commercially uninsurable.
- The $3.5 billion quarterly increase in ILS capital provides a concrete negotiating point for cedents seeking improved reinsurance terms. This specific data point can be used to counter narratives of constrained capacity and to secure more favorable pricing or broader coverage, particularly on diversifying perils.
Sources
ILS capital is “foundational” in reinsurance, grows to $144.5bn with 5-year CAGR 8.3%: Aon — artemis.bm
Underwriting discipline and risk transparency key as casualty ILS evolves: AM Best — artemis.bm
Why a blended reinsurance portfolio offers a compelling alternative to traditional ILS: Resolute Global Partners — artemis.bm
Auto and Home Insurance Consumers Getting Used to Using AI: JD Power — insurancejournal.com
Delaware Helps Firms Pay for Insurance, Trade Shows, Travel to Grow Exports — insurancejournal.com
New Illinois Law Requires Insurance for High-Speed E-Bikes — insurancejournal.com
European Insurance and Occupational Pensions Authority — eiopa.europa.eu