The outstanding market for collateralized reinsurance sidecar structures has accelerated its growth over the year to June 30th 2025, reaching a new record high of $17 billion at that time, representing around 70% expansion of this ILS market segment in just one year, an Aon Securities estimate shows.
Now, the latest data from the specialist insurance-linked securities (ILS) and investment banking unit of the broking giant shows that sidecar market growth has increased meaningfully.
Writing in the latest Aon Securities ILS annual report, Richard Pennay, CEO explained that record cat bond risk capital growth over the year to June 30th 2025 was “strongly supported by growth in sidecar activity across various lines of business,” together driving alternative capital in reinsurance to a new high of $121 billion at the mid-year.
From the $10 billion of capital backing reinsurance sidecars at June 30th 2024, the figure is estimated to have increased to a new record of $14 billion by the end of last year.
Aon Securities highlights in its new report that the momentum in the sidecar market has continued at pace through 2025 so far, while there has also been a growing number of sidecars supporting non-catastrophe lines of business, such as casualty risks.
Aon Securities CEO Pennay commented, “Sidecars also continued their strong multi-year growth with an estimated outstanding capital increase to $17 billion as of June 30, 2025.
“The sidecar market continues to provide clients with an alternative source of proportional reinsurance capacity to manage claims frequency and volatility, support portfolio growth, and exchange risk-based income for fee-based revenue.
“The strong equity type returns for investors across multiple classes of business in recent years have validated the proposition that rates and terms have improved through the hardening market.”
This has served to see the recovery in the reinsurance sidecar sector continue and accelerate.
The reinsurance sidecar market had reached around $8.4 billion in capital outstanding back in 2015, which was the previous high point before 2024 for this segment of the collateralized and ILS market.
However, as we’ve explained before, sidecar investors were impacted by the catastrophe loss experience of the reinsurance market through 2017 to 2019, while the looser terms around sidecar structures drove greater trapping of collateral.
Sidecars tended to come with buffer loss table clauses that were particularly favourable to the sponsors at the time, which made it very easy for capital and collateral to get trapped, even where losses were deemed a relatively remote possibility. That experience dented appetite for the reinsurance sidecar for a few years.
However, terms and conditions around collateralized reinsurance sidecars were updated in the years following and while it took time for investors to get comfortable with them, the hard work from structuring and legal teams to make sidecars a more balanced and equitable proposition for both cedents and investors have clearly proved effective.
Aon Securities CEO Pennay noted that the appetite for investing into sidecars has also broadened well-beyond catastrophe risks in the last few years.
“Investors remain interested in property portfolios due to historically high rates despite recent softening and are increasingly turning their attention to diversified specialty portfolios or casualty portfolios with collateral management opportunities,” he explained.
Adding that, “The development of executable casualty structures is a particularly exciting development as this culminates a more than twenty-year effort to bring meaningful alternative capital to the casualty segment.”
The reinsurance sidecar market appears in good health, as evidenced by the stunning growth seen over the last year, to reach this new $17 billion record size.
Sidecars have now become critical capital tools for re/insurers looking to efficiently leverage third-party capital, while providing a much more balanced opportunity for investors at the same time.
Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.
