Insurance capital shifts as 60% of investors expand

Gallagher Securities surveyed more than 60 large institutional investors.

Institutional investors are significantly increasing their allocations to insurance-related assets in 2026, creating a substantial and reliable source of non-traditional capacity for the insurance market.

According to Gallagher Securities’ “Unlocking Insurance Capital”, based on a quantitative survey of over 60 large institutional investors conducted in late 2025 and interviews in early 2026, shows that 60% of respondents plan to expand their exposure to insurance assets over the next two years. 

Almost no investors plan to reduce their holdings. This appetite remains strong even amongst firms with minimal current exposure, as 57% of investors holding less than a 5% allocation also plan to increase it. 

The surveyed investors are highly scaled, with 72% managing more than $1bin assets, including 16% who manage over $10b.

The primary driver for this capital influx is the asset class's lack of correlation with broader public markets, offering steady returns independent of financial market volatility. 

Investors are also attracted to pure underwriting returns, total return potential across market cycles, and portfolio diversification.

In terms of deployment, investor interest is heavily concentrated in liquid and easily scalable insurance-linked securities (ILS). 

The survey found that 79% of allocators plan to target catastrophe bonds and similar ILS structures. 

Sidecars and structured debt or equity follow at 53%, whilst direct investments in insurance company equity or debt stand at 21%.

Investments via Funds at Lloyd’s account for 13% of planned allocations. Property catastrophe remains the dominant line of business, with 72.9% of respondents expecting to invest in it over the next 12 months, primarily through catastrophe bonds. 

Cyber risk is the second most popular sector at 27.1%, followed closely by casualty lines at 22.9%.  Life and annuities attracted interest from 20.8% of investors, whilst terrorism risk was highlighted by 10.8%.

Return expectations from these investments vary heavily by structure. 

For portfolio and direct investments, investors typically target annual internal rates of return in the low to high teens, with some exceeding 20%. 

Sidecars and structured debt options generally cluster around the mid-teens. Funds at Lloyd’s target the mid-to-high teen range, whilst catastrophe bonds generally seek absolute returns in the high single-digit to low-teen range, or 3% to 6% above the risk-free cash rate.

Whilst investors identified low liquidity and a lack of risk transparency as the main hurdles to investing, many sophisticated allocators view these complexities as an opportunity to secure higher returns, or a complexity premium. 

Industry experts suggest that insurers engaging with these alternative capital providers during the current softening reinsurance market can drive competition and secure capacity on more attractive terms.