Collateral, confidence and the casualty surge: ILS amid a dynamic market
The evolving landscape of insurance-linked securities (ILS) is marked by an expansion into casualty risk, driven by increased investor interest and innovative capital strategies, according to Kathleen Faries, CEO, Artex Capital Solutions.
As parts of the global insurance markets cycle through softening conditions, a remarkable shift has occurred – insurance-linked securities (ILS) are expanding beyond traditional property catastrophe lines into casualty risk.
Kathleen Faries, CEO of Artex Capital Solutions, offered compelling insight into this evolution while speaking exclusively to Bermuda:Re+LS, underscoring how structural expertise, legal sophistication and investor sentiment are aligning to reshape the landscape.
The ascent of casualty ILS
Far from niche, casualty ILS is gaining traction. Faries said: “We have seen a significant increase in casualty discussions, interest and deals completed. Investor interest is coming primarily from private credit investors. Exit and exit terms, alongside the asset management of the cash flows, are two key areas of focus for investors.” These themes – liquidity, structured exit and income generation – are key to transitioning from conversation to execution.
This momentum isn’t isolated. Private credit investors are major drivers behind the growth in casualty ILS, drawn by diversification and reduced volatility. The casualty ILS market now offers broader entry points for lower-correlated, asset-rich strategies, appealing to those seeking alternatives to traditional life or property ILS.
A softening market in some places, but not weak
Responding to the rumoured “softening” market, Faries described the casualty landscape as “broadly flat, with social inflation and litigation impacts continuing to be a factor”. She distinguished casualty from property risk, stating that: “There have been some risk-adjusted rate reductions for property, but it does not appear that the reinsurance market is being categorised as being in a soft market.” Indeed, capital is up around 5 to 6% year-over-year in the reinsurance space – a classic hallmark of a market cycle in play.
Cyclical, not structural
Faries is clear: “I would not characterise the current market conditions as anything other than typical market cycle shifts. Abundant balance sheet capital, growing alternative capital interest and competitive pressure to deploy capital are, once again, influencing a relaxation in terms and rates.” She acknowledges that while 2025’s wind season is still unfolding, “the wildfire losses in early 2025 are not staving off some property catastrophe softening”. This cyclical ebb and flow reflects a market balancing capital abundance with some opportunistic pricing.
Investor sentiment in the ILS space
Despite the current cycle, investor appetite remains strong – especially for collateralised structures. Faries points to the robust issuance of catastrophe bonds: “Longer term, sophisticated ILS investors still view collateralised structures in the property cat market as attractive. This is demonstrated by the strong cat bond issuance in the first half of 2025, with over $17 billion of new limit issued.”
Swiss Re, in ‘ILS market insights: July 2025’, reported that the issuance boom was across nearly 60 transactions, growth which it attributed to “collateral yields, a healthy maturity pipeline, and a growing appetite for diversified risk exposures – including higher-frequency and multi-event structures, as well as new sponsors and perils”.
Simultaneously, private collateralised transactions are gaining traction in both property cat and casualty lines. Faries noted growing activity in this private ILS segment – reflecting greater attention to flexibility, yield and tailored structures.
Sponsors adjusting their capital stack
In response to more favourable conditions, sponsors are increasingly deploying ILS in creative ways. Faries observes: “We have seen an increase in casualty sidecars, which gives sponsors another capital management tool. The increased investor interest in casualty is also supporting the growth in the MGA space as well.” Faries noted that casualty’s lower volatility and appealing income float make it particularly attractive to private credit funds.
Divergence in capital allocation
Interestingly, there’s no cannibalisation happening between casualty and property cat. Faries notes: “Investors view the two lines as very different profiles. We continue to see additional capital focused on the property cat space, with at least five fund managers either having launchedtheir first fund or preparing to do so in the coming quarter.”
This bifurcation reflects investor strategies: property cat remains a core offering, while casualty ILS represents a complementary, stabilising allocation – not a replacement.
Appetite for long-tail risk
Speaking on longer-tail exposures, Faries explains: “Appetite is coming from investors who are looking for lines of business that will give them a lower volatility investment profile. It’s a quite different investor from the traditional institutional ILS investor that is looking for short-duration, non-correlating investments with liquidity potential.”
Investors are therefore stratifying their ILS allocations; casualty ILS attracts those seeking income float and longer-term return profiles, whereas traditional ILS (such as short-duration cat bonds) remains favoured by the classic, liquidity-focused institutional investor.
Artex’s positioning amid change
How is Artex adapting? Faries asserted: “Investor interest in casualty comes with complexity. Artex is well placed by virtue of our legal expertise, actuarial and advisory team, to continue to provide the necessary expertise and tools to accommodate and support this trend. We have teams that are embedded in all the jurisdictions of choice to transform and manage property and casualty lines.”
Artex’s jurisdictional footprint and interdisciplinary capabilities – legal, actuarial and advisory – position it to lead casualty ILS productisation as investor demand accelerates.
A market at an ILS inflection point
The interplay between a softening re/insurance market and surging ILS activity – particularly in casualty – signals a true inflection point. Property catastrophe bonds continue their record-setting trajectory, while casualty ILS moves from experimental to investable, powered by private credit, MGAs, and advanced structuring.
Faries’s insights underscore that while cycles ebb and flow, the underlying foundations of the ILS expansion are structural: capital efficiency, investor demand for diversification and institutional capability to manage complexity.
Whether this trend matures into long-term reallocation or remains a complementary adjunct depends on how well firms like Artex can sustain execution and underwriting discipline. For now, the casualty frontier is opening – and the ILS industry is poised to cross it.
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