Catastrophe Bond Allocations Climb to $136 Billion as Sidecars Hit $18 Billion
Allocations to catastrophe bonds and other insurance-linked securities surged 18% to $136 billion last year, reshaping the 180-year-old reinsurance model by shifting more risk to capital markets. Sidecar capital almost tripled to $18 billion as reinsurers reduced catastrophe loss coverage to just over 10% of total losses.
1. Reinsurance Model Transformed by Alternative Capital
Alternative investment managers boosted allocations to catastrophe bonds and other insurance-linked securities by 18% to $136 billion last year, upending a 180-year-old reinsurance model by transferring more disaster risk to capital markets. Reinsurers issued record volumes of cat bonds and expanded sidecar vehicles to $18 billion as they offloaded catastrophe exposure and cut their own coverage to just over 10% of total insured losses.