Casualty sidecars: why long-tail risk has found a new class of capital

A few years ago, a casualty sidecar was considered a niche deal. Today it is one of the most talked-about structures in reinsurance and a major theme at this year’s conferences. Here, Carrie Byler and Kenneth Durbin, from Howden Re, and Mitchell Rosenberg, from Howden Capital Markets and Advisory, discuss their growth and the capital behind them.

A recent roundtable with leaders from Howden Re and Howden Capital Markets and Advisory explored what is driving the trend from the capital side. This discussion turned to what it means for cedants and the programme market.

Casualty sidecars are growing because two markets are converging: cedants want to diversify their sources of capital, and institutional investors are looking beyond traditional private-market exposures for differentiated returns.

The market has scaled quickly. AM Best estimates the combined property and casualty sidecar market at $17 billion to $19 billion, with more than $2 billion of casualty sidecar capital raised since 2024. 

The case for cedants

As carriers review their enterprise risk management (ERM) strategies, many are diversifying their approach. That increasingly includes whole-account coverage through traditional reinsurance, structured deals or ILS, matched to each cedant’s risk tolerance.

“The growth of the casualty ILS market is a constant topic with our clients,” said Byler. “They may already be engaging with ILS capacity through cat bonds or other alternative vehicles, but are increasingly interested in understanding the casualty impact on both their individual portfolios and on the wider market. We expect that trend to continue into 2027.”

The choice between ILS and traditional reinsurance involves real trade-offs, including flexibility on terms, long-term relationships, claims handling and capacity that can flex with a cedant’s book. The right mix depends on each carrier’s risk appetite, data maturity and priorities.

Because the market is still relatively new, cedants also want assurance that investors will stay the course once losses start to be paid. By spending time with investors to understand their long-term approach, the two sides often build a wider relationship beyond reinsurance.

The same dynamic applies to programme business. MGAs wrote around $160 billion of premium globally in 2025, after annual growth of roughly 16% over the previous five years. The largest can now bring portfolios together and build broader relationships with capital providers, rather than securing capacity programme by programme.

“Alternative capital is changing how larger MGAs buy reinsurance,” said Durbin. “Instead of placing programmes one by one, those with scale can now build a single, portfolio-level partnership.”

Investors turn to casualty

Franklin Templeton estimates private markets now hold around $15 trillion in assets, up from less than $5 trillion a decade ago. That capital is seeking durable, long-duration returns and casualty reinsurance offers a new asset class.

“Casualty is increasingly fitting into the way sophisticated institutional investors think about capital allocation,” said Rosenberg. “They are looking at whether they can access a diversified portfolio of underwriting risk, generate attractive risk-adjusted returns and put meaningful amounts of capital to work over a longer period.”

Scale matters, but so does the quality of the underlying business. Many carriers have re-underwritten their books and cut limits. Investors need enough data to understand past performance, confidence in the cedant’s underwriting and reserving and clear alignment on how the risk will be managed.

“The conversation has moved beyond whether investors are willing to own long-tail insurance risk,” Rosenberg said. “We can increasingly structure around the duration: how much capital is required, when it is funded, when it can begin to come back and how the remaining liabilities can ultimately be exited.”

Looking ahead

“Carriers are looking for long-term reinsurance and capital partners who can help enable their long-term goals,” said Byler. “That is what they will be weighing as they plan for upcoming renewals and beyond.

“The strongest programmes will be backed by a mix of capital,” Durbin said. “Traditional reinsurers, carrier partners and alternative capital each bring something different. MGAs that balance all three will be best placed for upcoming renewals.

“We are seeing investor capital moving away from asking whether casualty belongs in their portfolio to asking how they should access it,” Rosenberg said. “The focus now is on finding the right underwriting partner and building a structure that works for both sides of the capital.”

For carriers planning for renewals, a sidecar is worth weighing alongside traditional options. Those that pursue one will need strong data, disciplined underwriting and a long-term view to attract this capital on the best terms.

Carrie Byler is head of US casualty, Howden Re; Kenneth Durbin is managing director, programme, Howden Re; Mitchell Rosenberg is co-head of global ILS, Howden Capital Markets and Advisory.

For more news from the American Property Casualty Insurance Association (APCIA) click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.