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You can get exposure to insurance-linked securities (ILS) through listed funds, interval funds, or—in some markets and for eligible investors—direct or privately placed transactions. Before investing, check what risks a vehicle actually holds and how you could exit it: a tradable fund share does not make its underlying insurance-linked holdings easy to sell, and a qualifying catastrophe can reduce or eliminate principal and interest.
What are insurance-linked securities?
ILS are financial instruments whose value is linked to an insurable loss event. Catastrophe bonds are the largest segment, but ILS is a broader category that can include reinsurance-linked investments, event-linked derivatives, and life-linked transactions.
For a catastrophe bond, an insurer or reinsurer transfers defined risks—such as hurricane, windstorm, or earthquake risk—to investors. The bond’s principal and interest depend on the contract’s trigger terms. A qualifying event can cause a partial or total loss of principal and interest.
Catastrophe bonds and other property-and-casualty structures
Fund disclosures describe potential ILS exposures including catastrophe or event-linked bonds, quota shares (often called reinsurance sidecars), collateralized reinsurance, industry loss warranties (ILWs), and event-linked swaps. These structures differ in how they transfer risk. A quota share, for example, shares premiums and losses from a reinsurer’s portfolio; other reinsurance-linked investments expose investors to premiums and losses under the referenced reinsurance.
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Life-linked securities
Life-linked transactions can transfer biometric risks: higher mortality can increase death-benefit outflows, while greater longevity can increase annuity payments. Some life securitizations address embedded value or reserve financing, so not every life-linked security is a simple catastrophe-risk investment.
What are the main ways to invest?
For most readers, the practical starting point is to compare available funds rather than assume that direct access is possible. Availability, eligibility, costs, and suitability depend on current fund terms and the investor’s jurisdiction.
| Route | How exposure is accessed | Key access or liquidity consideration |
|---|---|---|
| Listed catastrophe-bond ETF | Buy and sell fund shares through an exchange, if the fund is available through your brokerage and in your jurisdiction. | Shares trade during market hours, but their price can differ from net asset value (NAV), and the underlying bonds may be difficult to sell. |
| Interval fund | Invest in a fund that may combine catastrophe bonds with sidecars, collateralized reinsurance, ILWs, swaps, or other exposures. | Repurchases occur under the fund’s schedule and terms; they are not an on-demand exit right. |
| Private or direct ILS | Invest in an individual placement or transaction, where access and eligibility permit. | Contract analysis, specialist underwriting knowledge, and investor eligibility may be required; transfer and exit options can be limited. |
| Structured exposure within a fund | Gain exposure through instruments such as equity-linked notes or preferred shares issued by segregated accounts. | This is a fund-specific approach; one SEC prospectus describes such investments as generally illiquid. |
Listed catastrophe-bond ETF
One U.S. example is the Brookmont Catastrophic Bond ETF (ticker ILS). Its SEC-filed semiannual report says the fund began operations on April 1, 2025. The report states an objective of current income, with capital appreciation as a secondary objective. An SEC-filed supplement dated August 25, 2026, says the ETF’s primary listing venue changed from NYSE Arca to Texas Stock Exchange LLC effective September 18, 2026. Because listing venues and fund terms can change, check the latest SEC filings before trading.
Interval fund
An interval fund may provide access to a wider mix of ILS than a catastrophe-bond-only fund. Its repurchase offer is governed by fund-specific terms, including the timing and size of offers and how the fund handles requests that exceed the amount it seeks to repurchase. Read the current prospectus to understand the actual process rather than treating “interval” as a promise of regular or guaranteed liquidity.
Private placements and direct transactions
Direct or privately placed ILS can require detailed review of contract triggers, underlying risk, collateral, and loss-estimation methods. Rules are jurisdiction-specific. For example, the UK Financial Conduct Authority’s PS17/24 policy statement says the UK Risk Transformation Regulations restrict ILS investment to qualified investors and that ILS should not be sold to retail consumers under that framework. That UK rule should not be assumed to apply in other jurisdictions.
How should you assess ILS liquidity?
Assess liquidity at two levels: the fund share or investor interest you own, and the securities or contracts the vehicle holds. Easier dealing at the first level does not remove restrictions or sale difficulties at the second.
| What to compare | What to check in current fund documents |
|---|---|
| Share dealing | For a listed fund, review exchange hours, trading volume, bid-ask spread, premiums or discounts to NAV, and whether market makers are active. |
| Repurchases | For an interval fund, check offer frequency, amount sought, notice deadline, treatment of oversubscription, settlement time, and provisions for suspension or postponement. |
| Underlying holdings | Check whether catastrophe bonds have an active secondary market and whether private sidecars, collateralized reinsurance, ILWs, or structured notes have transfer restrictions or long claim-development periods. |
| Valuation | Find out how hard-to-trade securities are valued, how often prices are updated, and whether estimated values might lag new loss information. |
| Stress conditions | Understand how the vehicle handles a major event when claims are developing and multiple investors may seek liquidity at the same time. |
Some interval funds may hold illiquid securities without limit, subject to the applicable repurchase-liquidity requirement. That general possibility does not establish any particular fund’s holdings or offer terms; check its current prospectus. An exchange listing likewise does not guarantee that you can sell near NAV or at a tight spread.
What should you check before investing?
Use the current prospectus and related filings to check the risks in the actual portfolio, not just the fund’s name or headline strategy. These questions apply to both fund selection and, where relevant, review of a direct transaction.
1. Trigger and contract terms
Identify whether a trigger is indemnity-based, industry-loss-based, modeled, or parametric. Read the event definition, geography, time window, measurement source, attachment point, and exhaustion point. Check how losses are audited and settled, since these terms determine when and how losses reach investors.
2. Loss estimates and model uncertainty
Ask which model version and assumptions are used to estimate expected loss. Check how secondary perils, demand surge, climate-related changes, and model uncertainty are handled. A modeled expected loss is not a maximum possible loss or a guarantee.
3. Portfolio concentration
Review exposures by peril, region, sponsor, counterparty, season, trigger type, and maturity. Consider whether one event could affect multiple holdings at once. A broad ILS label alone does not establish diversification.
4. Collateral, counterparties, and structure
Check how proceeds are collateralized and invested, which assets serve as collateral, and which custodians, counterparties, or special-purpose vehicles sit between you and the underlying risk. Also trace any structured-note or other intermediary layer.
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5. Fund structure and exit terms
Determine whether the vehicle is an ETF, interval fund, or private investment. Find the applicable dealing, repurchase, redemption, lock-up, gate, suspension, and settlement provisions. Check how much exposure is in instruments the manager regards as illiquid.
6. Credit, leverage, and derivatives
Check whether holdings are rated or unrated, subordinated, or below investment grade. Review whether the fund can use derivatives or leverage and for what purpose. SEC fund disclosures warn that many reinsurance-related securities are below investment grade or unrated.
7. Total costs
Compare management and operating expenses, transaction costs, and any performance fees. Account for additional fund-of-funds or structured-note layers where applicable, and use current filings rather than marketing summaries.
8. Manager and operations
Review underwriting experience, risk controls, valuation governance, claims handling, counterparty oversight, and reporting frequency. Look for an explanation of how the manager handles loss events and contested claims.
Best Value
What do recent catastrophe-bond spreads tell you?
The National Association of Insurance Commissioners (NAIC) reported that, in Q2 2025, approximately 62% of catastrophe-bond issuance paid spreads of 5–9%, approximately 21% paid 1–5%, and approximately 17% paid above 9%; expected-loss levels were concentrated below 2%. These are issuance and expected-loss patterns for that quarter—not a current yield quote, realized investor return, or forecast. A spread is not the same as an investor’s net return, and these figures do not predict the outcome of a particular fund or security.
How do you compare two ILS funds?
Compare what each fund owns and how it works, not just whether both use “ILS” in their names. In particular, distinguish catastrophe-bond-only exposure from broader reinsurance exposure; exchange trading from periodic repurchases or private access; and direct holdings from structured exposure. Then compare peril and geographic mix, trigger and loss-model methods, credit and collateral arrangements, underlying liquidity, and total costs. Funds with the same broad label can hold materially different instruments and have different exit arrangements.
Diversification, low correlation, or a history of positive results does not assure a profit or protect against loss. A defined event can affect multiple positions, while claim development and valuation changes can complicate both reported performance and liquidity.
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