Allocators start buying cat bonds directly, but few risks can follow

Allocators are starting to buy insurance risk without a manager in between. An allocator is an institution that decides how a pool of money is spread across investments. ILS, short for insurance-linked securities, are investments whose returns depend on insurance events, and ILS managers are the specialist firms that run them on an allocator's behalf.

A second direct purchase

Artemis reported on 24 August that a $3.7bn multi-strategy fund at a large alternatives house had made its second direct catastrophe bond purchase. Ticket size both times: $250,000. Small money, but bought directly rather than through an external ILS manager, which is the part that matters.

Why a security travels

They can do that because a cat bond is a security. It has a CUSIP, the identification code that lets any portfolio system recognise it, a price and a settlement process, which is the routine that moves cash and ownership when a trade completes. Almost nothing else in reinsurance arrives in that form.

Think of the difference between a product with a barcode and a handshake deal. The barcode goes through any checkout. The handshake needs someone who was in the room.

Supply is the constraint

The constraint sits on the supply side. Vincent Prabis of Hiscox Capital Partners told Artemis on 10 September that his firm secures allocations in a record issuance year by leaning on cedent relationships built over decades. A cedent is the insurer that passes part of its risk on to a reinsurer. When a market is oversubscribed, with more buyers than bonds, access gets rationed by who you already know.

And the issuance concentrates. Just under $18bn came to market in the first half of 2026, from a narrow set of sponsors large enough to carry the fixed cost of issuing.

Thousands of mid-market carriers and captives cede risk every year. A carrier is an insurance company, and a captive is an insurer owned by the business or group it insures. None of that risk ever reaches an allocator in a form they can hold. NextBlock RWA builds the path that turns a mid-market treaty into an instrument an institutional investor can own.

A treaty, in this context, is a reinsurance contract covering a whole book of policies rather than a single risk, a bit like one shared umbrella held over a group instead of one umbrella per person.

In plain words:

Large investors can already buy catastrophe risk themselves, but only when it comes as a tradable security, and few issuers can afford to package it that way. Thousands of mid-market insurers have risk to pass on and no such packaging, so investors cannot get to it.

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