Bermuda’s reinsurers are still central to the global insurance-linked securities market but they are under pressure as record amounts of capital push prices down, a new AM Best report said.

The ratings agency said ILS capacity was expected to reach $114 billion by the end of 2025, boosted by the biggest-ever wave of catastrophe bond sales. In the first half of this year alone, issuance reached $16.8 billion, already topping the full-year record set in 2024. That drove the total volume of outstanding cat bonds to $52.7 billion, the highest ever.

The report, Record Cat Bond Issuance Boosts ILS Capacity and Reshapes Pricing Landscape, is part of AM Best’s look at the industry ahead of the Rendez-Vous de Septembre in Monte Carlo.

“ILS capacity reaches a record high in 2025. Capacity continues to exceed demand in 2025,” AM Best stated.

Bermuda carriers remain a core sponsor group. The report lists “Japanese, European and Bermuda primary carriers” as one of the categories sponsoring 4 per cent of cat bonds. However, the surge of new money is driving prices down for buyers of reinsurance.

At the June 1 renewals, property catastrophe reinsurance prices dropped by about 10 per cent on a risk-adjusted basis. According to Guy Carpenter, its Global Property Catastrophe Rate on Line Index showed an 8.1 per cent decrease year-to-date through July 1.

“Reinsurance pricing at the midyear 2025 renewals was the most favourable pricing for cedants in a few years, indicating that competition among capacity providers has intensified,” the report added.

The first half of 2025 also brought some of the biggest individual deals on record.

Bermudian-based Everest Re sponsored $1 billion through Kilimanjaro II Re, State Farm issued $1.55 billion across several notes and Citizens Property Insurance placed $1.525 billion. Citizens alone accounted for about 15 per cent of all Q2 issuance.

Despite major losses from disasters such as the $40 billion Los Angeles wildfires in January, investor demand for cat risk stayed strong, according to AM Best, keeping the trend towards lower prices.