Growing Institutional Interest in Insurance-related Assets for 2026
A recent survey by Gallagher Securities highlights a growing interest in insurance-related assets among institutional investors, anticipated for 2026. This development indicates a robust influx of non-traditional capital into the insurance sector. Titled “Unlocking Insurance Capital,” the study surveyed over 60 large institutional investors in late 2025, with follow-up interviews in early 2026. Notably, 60% of participants plan to boost their allocation to insurance assets over the next two years.
Most investors show minimal intent to reduce current holdings. Among those with less than 5% allocation, 57% are set to enhance their commitment. These respondents hold substantial influence, with 72% managing assets exceeding $1 billion, and 16% handling over $10 billion.
Insurance assets appeal mainly due to their limited correlation with traditional financial markets, offering stable returns despite market fluctuations. Investors are drawn to pure underwriting returns, attractive returns over market cycles, and diversification benefits.
The survey reveals keen investor interest in insurance-linked securities (ILS), with 79% targeting catastrophe bonds and similar structures. Other favored vehicles include sidecars and structured debt/equity (53%), while 21% are interested in direct investments in insurance company equity or debt. Investments through Funds at Lloyd’s account for 13% of planned allocations. The property catastrophe sector remains popular, with 72.9% planning investments, largely via catastrophe bonds. Additionally, the cyber risk sector is gaining traction at 27.1%, followed by casualty lines at 22.9%.
Return expectations differ significantly by investment structure. Portfolio and direct investments target annual internal rates of return from low to high teens, sometimes surpassing 20%. Sidecars and structured debt options are expected to yield mid-teen returns, while Funds at Lloyd’s target mid-to-high teen returns. Catastrophe bonds typically aim for absolute returns from high single digits to low teens, or 3% to 6% above the risk-free cash rate.
Despite the challenges such as low liquidity and limited risk transparency, many sophisticated investors view these as opportunities for higher returns—the so-called complexity premium. Industry analysts advise insurers to engage with alternative capital providers in the current softening reinsurance market to boost competition and secure capacity under favorable terms.