Consecutive record years of cat bond issuance, a fast start to this year, a broadening investor and sponsor base, and expansion into perils like cyber and casualty, means it’s an exciting time to be in the insurance-linked securities (ILS) space, according to Jason Bolding, CEO of Gallagher Securities.
Bolding recently took over as CEO of Gallagher Securities, the ILS and capital markets broker-deal division of reinsurance broker, Gallagher Re.
With Bolding now at the helm, and the ILS market in a phase of impressive growth, Artemis spoke with the CEO about his new role and the outlook for the cat bond and broader ILS market in the months ahead.
He explained that as CEO, part of his mandate is to ensure that Gallagher Securities is working very closely with broking colleagues across Gallagher Re and the wider Gallagher group, ensuring the firm has capabilities across the full spectrum of products where it can assist clients.
“To that end, we also want to continue to expand our capabilities beyond the typical ILS transactions. So, for instance, we have colleagues in London that have had some recent success in syndicate formation and Lloyd’s. We want not only to continue that work, but expand on it, so that at the end of the day, all we’re doing is matching risk to capital in whatever form that takes place,” said Bolding.
Last year, cat bond issuance hit a new annual high of $17.7 billion, and Artemis’ data shows that issuance in the first quarter of 2025 is on track to be a record for the period, which suggests another busy 12 months for the marketplace.
Bolding explained, “What you’ve seen the last couple of years is it was relatively quiet in the first couple months. The deals that came first got great execution. I think as advisors, everybody had the same idea, let’s push the calendar forward.
“2025 is really off to a fast start. It’s been a very active first month and a half. We see that investors continue to have capital to put to work. There’s a lot of demand for coverage from sponsors at the same time. So, we’ll see how that supply demand dynamic plays out over the next few months.
“But we would anticipate that it’ll remain really active all the way up until hurricane season. And then, of course, it is really hard to predict what’s going to happen in Q4 at the moment, but I would expect a similar level of activity that we’ve seen over the past couple years, which has been pretty active. To that end, I can’t see why we wouldn’t be talking about a record year again. But of course, I’m saying that in February, so time will tell,” he added.
The impressive growth of the cat bond market has been driven by new and repeat sponsors, and Bolding explained that there’s various reasons a cedent looks to the capital markets.
“Whether it’s finding more stable, long-term capital to help reduce volatility, provide cycle management, or just to get access to a broader pool of capital and create competition. Additionally, there’s been no shortage of cat events, which really highlights the need for coverage.
“When we look at the cat bond specifically, it certainly takes more work to issue a cat bond than to do traditional reinsurance, but there’s some muscle memory to the process, so being a regular sponsor can help. We see that once a cedent starts to incorporate ILS solutions into their regular reinsurance purchasing strategy, they generally will continue to do so down the line.
“We’re working with a few sponsors right now that are considering their first cat bond, just as a way to access different pools of capital. I think they’ve seen peers do it, and they want to replicate that success,” he said.
Of course, the cat bond market, while growing, is just one part of the broader ILS market, and Bolding emphasised that there’s a place for all forms of transferring risk in the market, whether that’s the liquid form, like cat bonds, or private transactions.
“I think the private side has always been a bit more in the money. So, naturally, the performance suffers a bit with active years, not only in terms of losses, but also from increased trapped capital, which puts a drag on returns.
“But with back to back, really positive years of returns that we’ve seen, we have heard some managers have started to have some recent success in capital raising on the more private side. Time will tell if that’s sustainable, especially given the start of the year that we’re having with the wildfires.
“On the sidecar side, we continue to see cedents look to form partnerships with investors through sidecars and related vehicles. And at the same time, you see this dynamic where investors have a real desire to get access to the premium flows that insurance risks can deliver. So, now, interest is expanding beyond just your typical property cat risk that we’ve always seen, now you see casualty ILS deals and so on. I think that bodes well for the sidecar market going forward as well,” said Bolding.
Readers will be aware that while nat cat risks still dominate the ILS world, other exposures such as casualty and cyber are increasingly coming into the fold, with appetite growing among sponsors and investors.
“It’s a really exciting time to be in ILS,” said Bolding. “We’re talking about cat bonds having back to back record years, another big start to the year, investors expanding into perils like cyber and casualty. It’s not only the typical ILS investors that are participating; we’re expanding the breadth of ILS investors that are out there too.”
“And, at the same time, that same expansion is happening on the sponsor side, too. You’re seeing private equity firms and corporates and governments and all types of new and different sponsors come to the market.
“We’re in a good state, and really, it’s a two way market, where you have the ILS markets really working for both sides of the trade. You have sponsors and investors really finding value. I think that means that we’ll see a continued expansion of the activity as we go forward,” concluded Bolding.
Read all of our interviews with ILS market and reinsurance sector professionals here.
