Global Reinsurers Keep Natural Catastrophe Exposure Under Control
In our view, robust capital adequacy and forecast profits will provide resilience for the reinsurance sector against major shocks in 2026 and 2027, although we expect catastrophe risk appetite to become more subdued given falling reinsurance pricing.
Natural catatrophe risk remains under control as most reinsurers maintain a measured approach to property catastrophe exposure growth, with some rebalancing portfolios in response to price declines.
We expect nearly all 20 reinsurers in our benchmark group to retain capital adequacy levels supportive of our ratings on them, even following a 1-in-250-year aggregate natural catastrophe loss event.
We expect reinsures’ appetite for catastrophe risk to become more subdued in 2027 as pricing for this business continue to soften. While the industry faces pressure from claims inflation, elevated U.S. casualty losses, climate-related volatility, and geopolitical uncertainty, robust capital adequacy and forecast still-solid profitability above the sector’s cost of capital for 2026 and 2027 should provide a buffer against major shocks.
We believe the sector's capitalization is likely to withstand severe industrywide losses exceeding $300 billion without the benchmark group’s capitalization falling below our 99.99% confidence level. In fact, we expect 19 of the 20 reinsurers in our benchmark group to maintain their capital adequacy and earnings scores even in the event of a 1-in-250-year aggregate natural catastrophe loss scenario. However, a severe natural catastrophe could have implications for individual companies' capital and earnings, depending on their specific risk exposures.
The benchmark group's 1-in-250-year property catastrophe exposure relative to S&P Global Ratings' total adjusted capital (TAC) remains flat in 2026 year over year. While most global reinsurers within our benchmark group (see table 2) increased their underlying 1-in-250-year net aggregate natural catastrophe exposure during the January 2026 renewals, with an average overall increase of 9%, capital growth more than offset this. A smaller subset of reinsurers have measuredly reduced their underlying absolute exposure.
Despite softer prices, the sector has maintained underwriting discipline, supported by robust capital positions and broadly favorable catastrophe loss experience. However, as prices continue to weaken and underwriting margins compress, the benefits of recent modest losses are likely to fade, leaving the sector increasingly exposed to earnings and capital volatility.
Global insured losses from natural catastrophes totaled $107 billion in 2025, about 26% lower than the year before and about 16% lower than the previous 10-year (2015-2024) average of $127 billion according to Swiss Re Institute. Losses were largely from secondary perils (smaller, but more frequent, natural disasters), most notably the California wildfires and increased severe convective storms across the U.S. The industry was not affected by major peak-peril events, such as hurricanes or earthquakes.
Reinsurance high attachment points (the threshold at which reinsurers start paying out claims) generally remained firm, helping limit reinsurers' incurred losses. Together with strong net investment income and continued solid earnings, the relatively modest losses supported capital accumulation across the sector, contributing to record capital levels and continued softening in catastrophe reinsurance pricing.
The reinsurance industry delivered solid results for the third straight year in 2025, not least due to the property catastrophe book's strong performance.
Natural catastrophe losses in 2025 remained within modeled expectations (see chart 1) despite insured losses of about $40 billion from the California wildfires.
We estimate that the peer group's total 2025 losses fell below a 1-in-5-year level.
Combined, natural catastrophe losses were below the group's budgeted catastrophe loss in 2025, with actual losses of approximately $14.5 billion (5 percentage points of the combined ratio) versus budgeted losses of about $21.5 billion (about 8 percentage points). 2025 marks the third consecutive year that the annual budget has not been exceeded (see chart 2).
Chart 1 | The reinsurance cohort's catastrophe losses were well within budget in 2025Aggregate insured natural catastrophe losses
Source: S&P Global Ratings.
Chart 2 | Losses have not exceeded budgets in the past three yearsCombined insured natural catastrophe losses for the reinsurance cohort
*Red: over budget. Green: under budget. §Long-term estimate of 20% market share for our reinsurance cohort. H1--First-half. Sources: Swiss Re Sigma, S&P Global Ratings.
Global insured natural catastrophe losses exceeded $100 billion for the sixth consecutive year in 2025, although totals remained below the Swiss Re 10-year (2015-2024) average of $127 billion.
Secondary perils were the primary factor behind this. Specifically, severe convective storms in the U.S. and the California wildfires yielded estimated losses of $50 billion and $40 billion, respectively.
The 2026 natural catastrophe loss budget for our benchmark reinsurance sample group is approximately $21 billion, flat year-over-year and translating into an industrywide insured loss estimate of about $105 billion, below the historical 10-year average (see table 1).
Table 1 | Average global insured loss estimates continue to riseExpected annual loss from natural catastrophes (bil. $)
Source
Scope
2021
2022
2023
2024
2025
2026e
Comment
Swiss Re Sigma
10-year average
74
81
89
98
111
148
2026e is based on Swiss Re's exponential trend
Munich Re
90
94
107
Aon
21st century average
84
99
Gallagher Re
N/A
121
136
AIR
2025 annual aggregate
106
123
133
151
152
Stochastically modeled by AIR
S&P Global Ratings' estimate
2026 catastrophe budget
65-70
~75
~85
~95
~100
~105-140
From budget estimate based on a 15-20% market share for our reinsurance cohort
N/A--Not applicable. Source: S&P Global Ratings.
We expect reinsurers to maintain a more disciplined appetite for frequency and accumulation risk compared to the trough of the previous cycle and we anticipate aggregate covers gradually become more available as the market softens.
While pricing has declined significantly, attachment points have remained high and more resilient than rates, suggesting that reinsurers have for now largely preserved the structural improvements from the recent hard market since early 2023 (in which prices were higher and reinsurers had more negotiating power).
However, increasing competition and industry ample reinsurance capacity are beginning to pressure reinsurers to broaden their coverage offerings.
Tighter terms, in particular from the 2023 renewals, helped keep the group's share of industry catastrophe losses below our 20% long-term estimate, but this share rose to approximately 14% in 2025 (see chart 3).
The cohort's share of losses from the 2025 California wildfires was approximately 22%, consistent with our long-term expectation that reinsurers absorb about 20% of industry catastrophe losses.
Chart 3 | Our reinsurance cohort covered 13.5% of insured industry catastrophe losses in 2025
Sources: S&P Global Ratings, Swiss Re Sigma.
We forecast 2026 combined pre-tax profits of approximately $51 billion, assuming investment income meet base-case expectations and catastrophe losses remain within the $21.5 billion budget.
Despite softer reinsurance pricing and potential financial market volatility, disciplined underwriting and investment income should support overall profitability.
A severe stress scenario implies a $73 billion buffer before capital depletion, assuming base-case investment returns, and before any shareholder distributions (see chart 4).
We expect individual reinsurers to show resilience, with stress scenarios likely affecting earnings rather than capital, as continued profitability bolsters already-substantial buffers.
Chart 4 | The industry's capital surplus suggests resilience in stress scenariosCapital surplus as per S&P Global Ratings' capital model (bil. $)
PBT--Profit before tax. Source: S&P Global Ratings.
Based on reinsurers’ average share of market losses over the past five years, we expect pre-tax profits (including the catastrophe budget) to provide a sufficient cushion against sizable insured industry losses for most reinsurers (see chart 5).
However, reinsurers with higher risk appetites and more subdued returns are likely to see their pre-tax profits depleted more rapidly than their peers.
Chart 5 | Strong earnings add resilience against losses from severe natural catastrophes
Scenario impact estimated based on our reinsurance cohort average market share over the past five years, which we estimate at 13.5%. We scaled this up to 20%, which is our long-term view of their market share. PBT--Profit before tax. Source: S&P Global Ratings.
Despite varying capital levels and risk appetites across the industry, resilience within our sample group remains high, supported by robust earnings generation and sustained capital accumulation in recent years.
We expect all 20 reinsurers in our sample to maintain their capital and earnings assessment scores in 2026 under a 1-in-100-year aggregate catastrophe loss scenario, assuming no mitigating capital management actions, compared with 19 reinsurers in 2025.
Chart 6 | Reinsurers' S&P Global Ratings-adjusted capital adequacy is resilient
Notch represents a capital adequacy category as per S&P Global Ratings criteria. Data as of Dec. 31, 2025. Source: S&P Global Ratings.
We estimate that natural catastrophe exposure relative to capital across our benchmark reinsurance group remains broadly stable, at 21% of S&P Global Ratings-adjusted TAC in 2026, compared with 22% in 2025 (see charts 7 and 8).
More than half of our benchmark reinsurance group saw an underlying increase in natural catastrophe exposure in January 2026 from January 2025 (see chart 9). However, the pace of this growth, at about 9%, was in line with general business and capital growth (see chart 10).
Few players have either reduced or maintained their previous underlying natural catastrophe exposure levels.
Chart 7 | Catastrophe risk appetite remains stable despite wide variation across reinsurers
TAC--Total adjusted capital. Source: S&P Global Ratings.
Chart 8 | Appetite for catastrophe exposure is broadly stable, with an average of 21% of capital exposed
Chart 9 | Most reinsurers in our benchmark group have a measured approach to underlying catastrophe exposureReinsurance cohort relative change in net 1-in-250-year aggregate loss (%)
Chart 10 | Reinsurers' net 1-in-250-year exposure increased 9% in 2026, in line with 10% business and capital growth
Earnings-at-risk exposure: Modeled annual combined net loss from a 1-in-10-year event, compared with the company's normalized expected profits before taxes and net catastrophe claims.
Capital-at-risk exposure: Modeled annual aggregate net loss from a 1-in-250-year event, against S&P Global Ratings' TAC.
As of Jan. 1, 2026, the benchmark reinsurance group ceded, on average, about 50% of their exposure to 1-in-250-years events. However, the approach to retrocession varies widely, with group 1 reinsurers often deciding to retrocede less risk on average than their peers (see chart 11).
Alternative capital remains a significant source of capacity, reinsurers have, on an absolute basis, kept collateralized tail protection largely stable, in line with prior year levels (see chart 12).
An increase in the amount of traditional retrocession reflects improved market conditions in the traditional retrocession market; specifically, softer pricing and increased capacity have enhanced the attractiveness of conventional retrocession covers, leading to an uptick in traditional usage across the sector (see chart 13).
Chart 11 | Retrocession increased slightly as buyer conditions improve
Chart 12 | Collateralized tail protection purchased by our reinsurance cohort is holding upCollateralized cession at a 1-in-250-year return
Chart 13 | Uncollateralized tail protection purchased by our reinsurance cohort has increasedUncollateralized cession at a 1-in-250-year return
Despite declining prices, the sector remains disciplined overall, with aggregate capital at risk from natural catastrophe exposures broadly unchanged in 2026. At the same time, reinsurers are pursuing divergent underlying growth strategies. Some are selectively increasing natural catastrophe exposure to offset pricing pressure while others are seeking growth opportunities in less volatile and less cyclical lines of business. Although the sector’s strong capitalization provides a significant buffer against adverse events, performance will increasingly depend on underwriting discipline, portfolio management, and prudent risk appetite frameworks. Reinsurers that successfully balance growth ambitions and risk mitigation will be well positioned to preserve earnings, protect capital strength, and navigate the next phase of the reinsurance cycle.
Table 2 | Reinsurance cohort
Group 1
Group 2
Group 3
Hannover Rueck SE
Arch Capital Group Ltd.
AXIS Capital Holdings Ltd.
Society of Lloyd's (The)
Everest Group Ltd.
Ascot Group Ltd.
Munich Reinsurance Co.
Fairfax Financial Holdings Ltd.
African Reinsurance Corp.
SCOR SE
RenaissanceRe Holdings Ltd.
China Reinsurance (Group) Corp.
Swiss Reinsurance Co. Ltd.
Convex Re Ltd.
Pelagos Insurance Capital Ltd.
Hiscox Insurance Co. Ltd.
Lancashire Holdings Ltd.
Arundo Re Société anonyme
SiriusPoint Ltd.
Toa Reinsurance Group
Sachin BhojaniLondon+44-20-3367-0539sachin.bhojani@spglobal.comCharles-Marie DelpuechLondon+44-20-7176-7967charles-marie.delpuech@spglobal.com
Taoufik GharibNew York+1-212-438-7253taoufik.gharib@spglobal.comJohannes Bender Frankfurt +49-693-399-9196 johannes.bender@spglobal.comMaren Josefs London+44-20-7176-7050maren.josefs@spglobal.com
Gargi NakheCRISIL Global Analytical Center, an S&P Global Ratings affiliatePuneVikas RathoreCRISIL Global Analytical Center, an S&P Global Ratings affiliate Pune
