Aon Securities Projects $136 Billion Cat Bond/ILS Market in 2026; US Property Cat Rate Drop of 14% at April Renewal
By The Reinsurance Daily Editorial ·
Aon Securities Projects $136 Billion Cat Bond/ILS Market in 2026; US Property Cat Rate Drop of 14% at April Renewal
Aon Securities Forecasts $136 Billion in Cat Bond and ILS Issuance Through 2026
Aon Securities’ Paul Pennay reports that cat bond, insurance-linked securities (ILS), and third-party capital are expected to maintain high deployment through 2026, with the market potentially surpassing $136 billion in size. The sector closed out 2025 with a record $100 billion outstanding, underpinned by a new-issue volume of $61 billion in cat bonds. Pennay notes that third-party capital accounted for approximately 10% of total reinsurance capital. These inflows have cushioned traditional rate softening, placing “continued pressure on margins, particularly at layers below the 10% annual aggregate loss threshold.” Aon positions the third-party capital influx as structurally persistent, with investor appetite remaining robust—the balance between collateralized reinsurance, cat bonds, and sidecars is, according to Pennay, “shifting in favor of more liquid ILS instruments.”
"The path to a $136 billion market is now a base case, with 10% of global reinsurance capital residing in third-party instruments." — Paul Pennay, Aon Securities
Guy Carpenter Reports 14% Drop in US Property Cat Rates at April 2026 Renewal
Guy Carpenter documents a 14% reduction in US property catastrophe rates following April 2026 renewals, the sharpest annual decline since 2014. Secondary layers saw price compressions of up to 12%, attributed to surplus capacity deployment by both traditional reinsurers and ILS funds. The firm attributes the magnitude of the rate drop to increased appetite from non-traditional capital and benign loss development over the past renewal cycle.
Gallagher Re: Non-Life ILS Assets Reach $135 Billion, Reinforcing Market Shifts
Gallagher Re’s James Wakefield states that non-life ILS assets climbed to $135 billion by Q1 2026, evidencing a 19% year-over-year increase. Alternative capital assets now account for 15% of global property catastrophe reinsurance limits, further amplified by a 19% growth in cat bond outstandings. Wakefield notes that “the current supply of alternative capital is directly influencing treaty attachment points and rate adequacy calculations.” The persistently high level of ILS deployment has catalyzed competitive dynamics and enabled brokers and cedents to push more favorable terms in cat and aggregate layers.
April 2026 Reinsurance Rate Softening Persists Despite Iran War: Market Data
April 2026 renewals saw continued reinsurance price softening, with global property-catastrophe capacity now standing at $785 billion. Despite the geopolitical shock caused by the Iran conflict, total reinsurance capital rose to $649 billion, up from $107 billion in Q1. Alternative capital contributed $136 billion, maintaining its roughly 20% market share. Analysts observed a 10% softening in average global cat XoL pricing, echoing the increased deployment noted by both Aon and Gallagher Re. A lead underwriter from Swiss Re commented that “the Iran war added volatility, but failed to move the cost curve in the face of overwhelming capital inflow.”
New York Restaurateur and $20 Billion Auto Insurance Fraud Market Highlighted
A New York restaurateur faces charges in a no-fault auto insurance fraud scheme valued at $50,000, with alleged payouts of $15,000 uncovered. The broader context set by prosecutors points to a US no-fault insurance market estimated at $20 billion annually. The incident underscores the ongoing susceptibility of sizeable premium pools to opportunistic fraud.
Giuliani’s $10 Million Sexual Harassment Suit to Proceed in NY Amid $148 Million Liabilities
Rudy Giuliani’s bid to dismiss a $10 million sexual harassment case in New York was rejected on procedural grounds. The suit adds to his mounting legal liabilities, including a $148 million defamation judgment and a previously reported $1 million loan default. Giuliani's claims exposure and personal risk profile have escalated significantly, posing unique reputational and D&O liability considerations for insurers.
EIOPA Guidance Central Amid Dynamic European Regulatory Environment
The European Insurance and Occupational Pensions Authority (EIOPA) maintains a central role in regulatory guidance for a market surpassing $2 trillion in assets. Its evolving recommendations particularly impact Solvency II capital models and cross-border reinsurance activity. Recent frameworks have helped standardize reporting and solvency assessment, affecting over 120 European insurers and occupational pension funds.
Key Takeaways
- Brokers and cedents should use the 14% property cat rate reduction (Guy Carpenter) as a negotiation lever for further aggregate limit improvements in upcoming midyear placements.
- The pronounced growth in ILS assets—from Aon Securities’ projected $136bn to Gallagher Re’s Q1-2026 figure of $135bn—suggests a persistent alternative capital presence constraining meaningful hardening even during geopolitical shocks, as confirmed by the Iran war’s muted impact on global rates.
- With $649 billion in reinsurance capital (insurancejournal.com) and 20% underwritten via alternative capital, treaty portfolios will require closer tail risk stress-testing as dilution of pricing discipline accelerates.
- US auto insurers should increase claims audit frequency in the $20B no-fault segment, given frequent fraud cases with incident values in the $50,000 range.
- The EIOPA’s evolving Solvency II guidance—affecting over 120 entities—signals increased regulatory uncertainty for capital relief structures, especially for cross-border retro and ILS transactions.
Sources
Cat bond, ILS, third-party capital activity to remain robust through 2026: Pennay, Aon Securities — artemis.bm
US property cat rates down 14% in 2026 after April renewal, biggest drop since 2014: Guy Carpenter — artemis.bm
Alternative capital reinforces market trends. Non-life ILS assets hit $135bn: Wakefield, Gallagher Re — artemis.bm
Reinsurance Rates Continued Softening During April Renewals, Despite Iran War — insurancejournal.com
New York Restaurateur Charged In No-Fault Auto Insurance Fraud Scheme — insurancejournal.com
Giuliani Fails to Get $10 Million Sexual Harassment Suit in New York Dismissed — insurancejournal.com
European Insurance and Occupational Pensions Authority — eiopa.europa.eu