Aon survey: 15% of U.S. insurers include ILS/third-party capital in their 2025 strategies

A recent survey conducted by Aon’s Capital Advisory division reveals notable trends in the U.S. insurance industry's capital management strategies for 2025. The poll found that insurance-linked securities (ILS) and third-party reinsurance capital solutions will play a significant role in insurers’ plans.

Amid a challenging market environment, insurers are adopting a growth mindset supported by positive rate momentum. As a result, their capital needs are evolving, according to Aon. One key insight from the survey is the U.S. insurance sector's ongoing exploration of capital markets for reinsurance and risk transfer solutions. Specifically, 15% of respondents indicated that ILS solutions are part of their 2025 capital management strategies.

The findings also highlight insurers’ growth ambitions and their ability to manage catastrophe retentions in relation to surplus. However, many insurers still view these retentions as significant compared to earnings. To support premium growth plans, a broad range of capital solutions is necessary, with reinsurance and risk transfer playing a critical role.

When asked about capital sources for 2025—excluding traditional reinsurance, retained earnings, and equity—15% of respondents pointed to ILS and third-party capital-backed reinsurance arrangements. Additionally, 10% cited catastrophe bonds or ILS as part of their plans, while another 5% mentioned sidecars or third-party capital.

This focus on alternative capital suggests a notable interest in collateralized reinsurance funds, catastrophe bonds, and other third-party investor-backed solutions. Other capital structures supported by institutional investors also featured prominently in the survey responses. For instance, 20% of respondents plan to use debt or surplus note issuance, while 22% indicated plans to leverage structured reinsurance. Aon noted that structured quota shares could be a viable solution in this context.

With some investors and ILS fund specialists increasingly focusing on quota share reinsurance investments, the survey points to a growing reliance on capital managed within the ILS market or deployed by adjacent entities and allocators. By excluding traditional reinsurance from this part of the survey, Aon underscores the U.S. insurance industry's increasing sophistication in accessing institutional and capital markets.

These findings signal continued positive momentum for 2025 in areas such as catastrophe bonds, ILS, sidecars, and other third-party reinsurance capital arrangements.