The growth story behind insurance-linked securities

AFTER years of low yields and rising macro volatility, investors are demonstrating renewed interest in insurance-linked securities (ILS) for their very low correlation with traditional financial markets. Despite event-driven volatility, the first half of 2025 reaffirmed the market’s strength and growing scale.

According to mid-year industry data, ILS issuance reached US$17.2 billion across nearly 60 transactions, making 2025 the second-largest year in the market’s history, with half the year still to go. The total market size surpassed US$56 billion, having expanded by more than 75 per cent since 2020. Last year alone saw 10 new issuers and three wildfire bonds, signalling growing investor confidence alongside supportive market dynamics.

Growth drivers

The surge in issuance is being fuelled by both sides of the equation: strong demand from sponsors seeking risk transfer and an equally strong appetite from investors looking for diversification. Elevated collateral yields and a wave of maturing bonds have created liquidity to reinvest. At the same time, diversification within the market has deepened, with new sponsors, new perils, and more sophisticated deal structures emerging.