Alternative Capital Reaches $121 Billion Record High, Aon ILS Report Shows

Aon has released the 19th edition of its Insurance-Linked Securities (ILS) Annual Report—September 2025, which highlights record levels of catastrophe bond issuance and significant growth in alternative capital. According to the report, alternative capital reached $121 billion by June 30, 2025, marking the most active 12-month period in ILS market history.

Per the report, catastrophe bond issuance surpassed $21.7 billion during the 12 months ending June 30, 2025, a 21 percent increase from the prior year. Total outstanding catastrophe bond volume rose to $54 billion, up $9 billion from June 30, 2024, representing a 19 percent increase.

According to Aon, the first half of 2025 saw 56 catastrophe bonds issued with a total of nearly $17 billion, equaling the full-year 2024 total in just 6 months. The average transaction size during the first half of 2025 reached $302 million, a 12 percent increase compared to the second half of 2024.

The report noted three dominant trends in the catastrophe bond sector: insurer participation rose to 58 percent of total issuance; regional concentration intensified, with 93 percent of issuances tied to North America; and Florida-focused issuances climbed to $5 billion, a 46 percent increase over the prior year, representing 16.6 percent of the total outstanding market.

Per Aon, catastrophe bonds generated a return of 14.1 percent for investors during the 12-month period, as measured by the Aon Securities Catastrophe Bond Total Return Index. Despite significant losses from Hurricanes Beryl, Helene, and Milton, as well as record California wildfires, the ILS market experienced minimal impairments, highlighting the relative remoteness of most catastrophe bond exposures.

Sidecar capacity also grew, with outstanding capital reaching $17 billion across property and casualty lines by June 30, 2025. The development of casualty sidecars was described in the report as a milestone, representing the culmination of more than 2 decades of effort to introduce alternative capital to casualty markets.

Aon said maturities of catastrophe bonds totaled $12.9 billion during the period, much of which was redeployed into the sector. Client participation also expanded, with 52 repeat clients and 13 new entrants bringing the total number of active sponsors to 106 for the first time.

Richard Pennay, CEO of Aon Securities, said, "Driven by higher building costs, evolving weather trends, and the push to close the protection gap, cedents are increasingly seeking coverage beyond what is available in the traditional reinsurance market. With the uncorrelated nature of catastrophe bonds, and investors achieving double-digit returns, the space continues to demonstrate its value and outpace growth in other areas of the insurance industry."