ILS market faces tougher test as focus shifts to efficiency

The insurance-linked securities (ILS) market has demonstrated its capacity for growth, but its next challenge will be ensuring that expansion is efficient and sustainable, according to Hanni Ali, chair of ILS Bermuda and CEO of Radix ILS.

Opening ILS Bermuda Convergence 2026, held October 12-14, Ali told more than 325 delegates from over 15 countries that the industry’s priorities were evolving as the asset class matured.

“A year ago, this conference talked about expansion, with capital moving into cyber, terrorism, and specialty classes, and about Bermuda’s role as the home of ILS structuring,” he said.

“We know this market can grow. The harder question for 2027 is whether it can grow efficiently, and whether market discipline, the technology and models we employ, and our creativity can keep pace with the capital.”

Investor expectations are becoming more demanding as the market develops.

“They want transparency, alignment, and a clear view of how risk is modelled, priced, and structured. I welcome that. It's a sign of maturity.”

Meanwhile, the range of risks being considered for alternative capital continues to widen beyond traditional peak perils into casualty, technology risk, sovereign exposures and development finance.

Ali pointed to the global protection gap, citing Swiss Re’s estimate of $424 billion for 2025, up from $395 billion the previous year, as evidence of the opportunity for the industry to extend its reach.

However, he cautioned that technological advances should not be mistaken for certainty, particularly as AI and new modelling techniques become increasingly influential in risk assessment.

“They’re powerful, but we need to be cautious in how we use them and recognise what they can and can’t do.”

Ali framed the conference around three themes – evidence, expansion and endurance – with the reliability of risk science, responsible innovation and effective regulation underpinning the market’s continued development.

“Bermuda’s role in this market is built on trust – trust in the science, trust in the infrastructure we built to transfer risk, and trust in one another.”

With the ILS market looking towards further expansion in 2027, the challenge he set out for delegates was not simply to identify new opportunities for capital, but to ensure the market maintains the foundations to support them.

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