In order for the insurance-linked securities (ILS) market to succeed and truly compete with traditional reinsurance capacity, it must expand into casualty, which is why Ecclesia Re, the specialist reinsurance broking arm of Ecclesia Group, is placing such strong emphasis on this area.
Artemis spoke with Jens Ziser and former Securis executive Mattias Eng, who serve as Managing Director, Treaty Reinsurance, and Capital Markets Consultant, respectively at Ecclesia Re around the 2025 Baden-Baden Reinsurance Meeting.
With casualty ILS solutions such as sidecars seeing a surge of interest and growth across the industry, Ecclesia Re has been intensifying its focus in this space.
Given this momentum, we asked Ziser and Eng whether they believe casualty ILS could one day rival traditional catastrophe bonds
“In terms of market size, absolutely. Casualty premiums and reserves represent the mother lode for the ILS market. If ILS is going to succeed and truly compete with traditional reinsurance capacity, it must expand into casualty. That’s why we’re placing so much focus there — casualty represents an enormous pool of premiums and reserves,” commented Eng.
He continued: “If you look at the evolution of the ILS market, phase one was catastrophe bonds. Phase two was the development of fronted reinsurance and collateralized reinsurance structures, largely focused on property catastrophe business.
“We believe phase three will be the application of those same fronting and collateralized re technologies to casualty risk. That’s where the next major wave of market growth will come from.”
Eng also addressed what innovations and structures are emerging within the industry to reduce trapped capital in casualty ILS, given its long-tail nature.
“I think what we’re seeing in casualty ILS is that lessons have been learned from what happened with trapped capital on the property cat side. The structures we’re now working with have defined maturity dates and clear communication milestones where the transaction concludes. That means we’re avoiding the situation we saw in property cat, where capital could remain tied up for years.
“This improvement makes participation by ILS funds and hedge-fund-backed reinsurers more feasible. So overall, I’d say the market has learned important lessons from the capital-trapping issues seen in property cat,” Eng told Artemis.
Ziser also added: “What we’re observing is that, so far, neither on the client nor the investor side has casualty ILS become a commodity market. Every deal remains highly tailored, both to the specific needs of the client and to the investor’s risk appetite.
He went on to emphasize the role of intermediaries in navigating this complexity. “That’s one reason why it’s valuable to have a reinsurance broker like us bridging the gap between the two sides. There’s still an educational component required for both investors and clients.
“So, there isn’t one particular type of reinsurance structure that’s most applicable—it really depends on the specific situation. What is important, though, is that the structure provides sufficient cash flow. On the casualty side, you’re typically not talking about excess-of-loss capacity; instead, you’re more often dealing with quota share or working-layer business. Frequency risk isn’t a major issue for investors, but severity is.”
To illustrate, Ziser explained how cash-flow stability a defining feature of successful structures.
“For example, a structure that provides loss-free coverage for many years and then a large loss every decade wouldn’t really work—that’s quite different from a cat bond. In casualty ILS, you need consistent cash flow to make the product viable.
“In terms of product innovation, it could take many forms—proportional, non-proportional, or hybrid structures, multi-year or multi-line arrangements. The key is tailoring the structure to balance investor needs, client requirements, and cash-flow dynamics,” Ziser added.
We then asked the figures whether they believe the industry is seeing realistic progress being made towards a secondary market for long-tail casualty ILS positions.
“Yes, definitely. Beyond the large reinsurers who are active on the property side through fronting arrangements, we’re seeing clear momentum,” Ziser said.
The MD explained that over the past couple of months, Ecclesia Re has spoken with around 20 umbrella entities and 40 different stakeholders and emphasized that there’s been tremendous interest from both sides of the market.
“On the client side, there’s a strong appetite for education, and we’re lining up several pilot projects with insurance carriers for early next year. At the moment, we have several potential opportunities for the remainder of this year.
“In the last six weeks, progress has been rapid. Many of these opportunities are already in the due diligence phase — we’ve moved well beyond simply accessing data rooms. We have mandates in place, data under review, and counterparties actively performing due diligence. The next stage will be negotiating final terms,” Ziser added.
“Frankly, we didn’t expect things to move this quickly and I’d be pleased if we can close at least two casualty ILS capital-driven transactions by year-end. My initial ambition was to demonstrate a proof of concept by mid-next year, but at this pace, it looks like we’ll have that proof of concept ready by January 1st.”
To end, Ziser provided Artemis with an overview of where Ecclesia Re sees the most readiness among European cedents to engage with structured casualty ILS.
“When we look at potential client segments, we’re really talking about four groups: traditional insurance companies (particularly in Germany), captives, the legacy or run-off market, and the reinsurance market.
“Interestingly, traditional insurers are showing a lot of curiosity. They’re observing developments closely and requesting meetings, so there’s definitely interest. However, they’re not the first movers. They want to see proven concepts before committing to transactions. My view is that once we’ve completed and publicised a few successful deals, we’ll start to see traditional European insurers take pilot steps in casualty ILS. Once they can demonstrate that it works, others will likely follow and begin to scale up.
“Right now, that’s what’s missing in continental Europe. We’ve seen these types of structures emerge in the U.S. and the U.K., but not yet in Europe, and that’s exactly why we see significant potential here.”
Ziser affirmed that Ecclesia Re’s most advanced discussions are currently at the captive and reinsurance retrocession levels. While on the legacy side, activity has been limited, not necessarily because of ILS itself, but due to the broader market environment.
“With inflation and other factors, there isn’t much legacy deal flow at the moment. Also, many legacy carriers are already backed by private equity, so their focus tends to be different.
“So, right now, captive and retrocession structures are where we see the most readiness. But by next year, we expect to be in active negotiations with several insurance companies as well,” Ziser concluded.
Read all of our interviews with ILS market and reinsurance sector professionals here.
