Broker Aon has said that interest in leveraging the reinsurance sidecar structure to support casualty exposures is continuing to build, with a number of new casualty reinsurance sidecars expected to launch later in 2025 and into 2026.
Also in 2024, the broker estimated that the outstanding market for collateralized reinsurance sidecar structures had reached a new record high of $10 billion.
Now, Aon has reported that sidecars remain a key focus for protection buyers, with increased investor appetite for insurance-linked securities (ILS) opportunities helping many traditional reinsurers to expand their sidecars in 2025.
Our sources suggest that the sidecar market could have grown by around $2 billion since the middle of 2024, while the focus is also expanding.
We’ve already seen a number of casualty reinsurance sidecar structures launched in the market and this is one area that Aon highlights in its latest reinsurance market report as primed for growth.
In October 2024, Starwind Specialty Insurance Services, LLC secured $270 million of collateralized reinsurance capacity for certain casualty risk focused programs, through the launch of Fractal Re Ltd., a multi-year collateralized quota share sidecar structure.
In September last year, Ledger Investing funded and launched a new $100 million casualty sidecar for a global reinsurer, financing the company’s casualty reinsurance business over three underwriting years on a quota share basis.
While Aspen Insurance Holdings Limited, and asset manager PIMCO, launched Pando Re Ltd., a Bermuda-based, casualty focused collateralised re/insurer that act as a reinsurance sidecar.
Of course, AXIS Capital also has its Monarch Re vehicle which has become a key casualty reinsurance capital partnership structure for the company.
Plus, Accelerant has its multi-year structure Flywheel Re, which also allocates capital to support casualty lines.
“Interest from institutional investors in sidecar opportunities continues to grow, especially for casualty risk,” Aon explained in its report.
Aon has seen traditional reinsurers increasingly “evaluating the benefit of bringing in additional reinsurance and retrocession capacity with attractive economics.”
While at the same time, large insurers are also looking to modernise their use of casualty reinsurance, with ILS structures such as the sidecar one avenue.
Aon said, “Large insurers have also analyzed the structures to understand the collateral investment strategies that underpin the sidecars, weighing the potential benefits and considerations of a transaction to supplement their traditional casualty reinsurance programs.”
The broker added, “While many of the discussions are still exploratory, the expectation should be for several of these opportunities to close throughout the remainder of 2025 and into 2026.”
Which sounds promising for the pipeline of casualty sidecar and other ILS structures, as interest in tapping third-party investor capital to support and partner on casualty reinsurance lines continues to build.
Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.
