For the insurance-linked securities (ILS) market to expand beyond its current size, investors must be willing to partner more closely with cedents and provide solutions that address the full spectrum of their needs, rather than focusing narrowly on a single line of business, Shiv Kumar, President of GC Securities told us in an interview.
Kumar leads the capital markets and ILS specialist unit of reinsurance broker Guy Carpenter and during an interview with Artemis around the time of this year’s Monte Carlo Rendez-Vous event, he outlined what he sees as the biggest challenges currently facing the ILS market.
Starting with catastrophe bonds, Kumar cautioned that investors must be careful to not limit themselves to remote, per occurrence, modellable peak peril covers if they want to remain relevant to cedents.
“There is currently ample capacity in the traditional reinsurance market which is relatively more flexible and constructive around coverage and structure. We have seen this dynamic in the cyber ILS space where the momentum has somewhat stalled due to mismatched expectations between the cedents and investors,” Kumar said.
He continued: “For the ILS market to truly expand beyond its current size, investors need to partner more closely with cedents and provide solutions that address the full range of their needs, rather than focusing narrowly on a single line of business.
“It’s crucial that we work with our end capital providers to broaden mandates and deploy funds with greater flexibility. Doing so will help us build stronger, more enduring relationships with cedents.”
On the current health of the ILS market, Kumar emphasized that the sector is in a stronger position today.
He noted how the trapped capital issues that followed Hurricane Irma have now largely been resolved, freeing funds for new investments and improving overall market efficiency.
“The legacy trapped capital issue was really highlighted by hurricane Irma. As some time has passed, the trapped capital from the system has been released, cedents are more aware of concerns with appropriate loss reserving/improved loss reporting and further the legislative reforms in Florida have given some comfort around future events (as has been experienced in more recent events, Hurricanes Ida, Helene and Milton).
“That said, the cat bond market has grown somewhat at the expense of the collateralized reinsurance because the bonds are liquid and have offered improved structures for extensions and commutation since 2022. The other development has been more collateralized reinsurance being placed behind rated fronting reinsurers, which minimizes the friction in the system,” Kumar said.
He continued: “The capital with dedicated ILS managers has generally been sticky. Reinsurer-affiliated ILS funds are growing and will continue to be active through the cycle. There are opportunistic hedge funds and multi-strategy asset managers who may flex their deployment depending upon market conditions but we believe that keeps the space healthy instead of getting overcapitalized and undisciplined.”
Looking ahead to year-end, Kumar expects “noise” around potential UCITs fund restrictions but noted that GC Securities continues to see positive investor sentiment.
“The investor base is naturally segmented between those who prefer shorter tail volatility of cat bonds and those who prefer the longer tail asset-backed returns of casualty sidecars. We expect this to continue in the near term. Continued increased scheduled maturities from Q4 2025 through Q2 2026 in existing cat bond structures should keep the appetite of investors strong.”
Moreover, 2025 has already been an exceptional year for the cat bond market, with a joint record eight new sponsors entering the space in Q2 2025, taking the year’s total to 11.
The total cat bond issuance record was also broken soon after July 1st, and at $18.6 billion at the time of writing, according to Artemis’ data, is on track to hit and exceed the $20 billion mark.
As a reminder, you can analyse the catastrophe bond market using our charts and visualisations, which are kept up-to-date as every new transaction settles.
As cat bond issuance continues to accelerate, Kumar stressed the need for efficiency.
“As the rate of issuance grows, the market has to become more efficient to keep pace. This requires that the cycle time for each of the three major components of the process – modelling, documentation and marketing – be reduced so that there is higher throughput in the system.
“Cedents typically want their bonds to be placed contemporaneously with the traditional reinsurance in an integrated program and so the processes have to track each other closely,” Kumar said.
Read all of our interviews with ILS market and reinsurance sector professionals here.
