Institutional investors are increasing allocations to insurance-linked assets, with non-traditional capital moving from the periphery to the mainstream, a Gallagher Securities report says.

“These alternative forms of insurance risk financing – which span the spectrum from cat bonds through to sidecars and even direct investments in insurance companies’ debt and equity – now represent a powerful complement to traditional reinsurance,” CEO Jason Bolding said.

“We’re in a market where capital wants access to high-quality underwriting, and insurers want stable, scalable capacity. The value comes from building the bridge between the two.”

The report – Unlocking Insurance Capital: The View From Investors – finds 60% of surveyed investors plan to increase their exposure to insurance-related assets.

Drivers include non-correlation with public markets, diversification benefits and the ability to access underwriting returns as a source of performance, which distinguish opportunities such as cat bonds from equity investments.

The report finds 79% of respondents plan to allocate to catastrophe bonds and similar types of insurance-linked securities; 53% to sidecars and structured debt and equity; 21% to direct investments in insurers’ ordinary debt or equity; and 13% to funds at Lloyd’s.

Property catastrophe remains the dominant area of interest, cited by 72.9% of respondents, followed by cyber (27.1%) and casualty (22.9%).

For most fund managers and institutional investors, insurance risk sits within their allocation to “alternative” investments, alongside assets such as private equity, real estate or private credit.

Gallagher Re says a growing investor base comes with increasing sophistication, with greater emphasis on transparency and governance. Return expectations differ by the type of security and structure.