This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.

Reinsurance sidecars have continued to gain in popularity and brokers have commented today on the expansion of this third-party investor supported segment of the insurance-linked securities (ILS) market, seeing it as one area driving robust capital growth into 2025.

Previously, Aon Securities estimated that the outstanding market for collateralized reinsurance sidecar structures had reached a new record high of $10 billion in a report from September 2024, which that broker’s capital markets unit said represented roughly 40% growth on the prior year.

While, AM Best and Guy Carpenter put the reinsurance sidecar market at between $6 billion and $8 billion, as of the middle of 2024.

Then, after the January renewals this year, Gallagher Re said that reinsurers within the EMEA regions had been offering more capacity, in part empowered with ILS-fueled new sidecar capacity.

Now, in commentary published in April reinsurance market reports, both Gallagher and Aon have again highlighted the collateralized reinsurance sidecar as an area of continued expansion, within third-party or alternative forms of ILS capital.

Gallagher Securities, the capital markets and ILS arm of Gallagher Re, said that, “Sidecars have continually gained in popularity, with Gallagher Securities observing nearly a roughly 50% increase in issuance YOY.”

This broker said, “Cedants are increasingly forming partnerships with investors through sidecars and related vehicles, driven by investor demand for access to premium flows from insurance risks.”

Adding that, “This interest is now extending beyond traditional property catastrophe risks to include casualty and other non-cat ILS risks and using innovative structures, signaling a strong future for the sidecar market.”

Aon’s Reinsurance Solutions and its Aon Securities arm also commented on the continued high-levels of activity in the reinsurance sidecar space in its new market report.

Aon also explained that new inflows to sidecar structures are seen as one of the key drivers for alternative reinsurance capital growth, alongside catastrophe bonds.

As we reported, Aon sees alternative or ILS capital in reinsurance as having reached $115 billion by the end of 2024, a figure that has likely grown with the robust catastrophe bond issuance seen in Q1 2025.

Aon said, “In addition to the robust growth of the catastrophe bond market, the broader ILS market has seen further growth in sidecar capital, pushing alternative capital to nearly $115 billion.

“Increased investor appetite has allowed many traditional reinsurers to expand their sidecar and/or catastrophe bond programs, enabling the deployment of additional capacity.”

This broker continued to explain that, “Sidecar capacity has also grown, in line with what we’ve seen over the prior two years. New entrants to this market—many of whom are well-regarded underwriters—have developed new platforms, creating exciting opportunities for investors. Further, existing sidecar offerings (e.g., Everest’s Mt. Logan) continued to expand from reinvigorated marketing efforts and strong returns over the past two years.

“The sidecar market has also grown beyond natural catastrophe risk to long-tail casualty opportunities, generating interest from new types of asset managers looking to manage more long-term capital.”

However, Aon also noted that the January 2025 California wildfires will cause losses for many reinsurance sidecar structures.

Saying, “The sidecar market, on the other hand, will be impacted by the wildfires, given that these contracts are typically structured as a pro-rata share of non-proportional reinsurance portfolios.

“While it’s too early to tell how the wildfires will impact the overall returns of the property sidecar market, it’s reasonable to assume a negative return during the first quarter of 2025.”

Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.

Reinsurance sidecar market seen ~50% bigger by Gallagher. Aon notes Q1 wildfire impacts was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.