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Retrocession buying set to return as reinsurance market softens

S&P Global Ratings estimates reinsurers’ benchmark group could sustain industry-wide losses of more than $300 billion without dropping below key confidence levels.

Reported · Written up by our desk · Reinsurance

Retrocession buying is set to see renewed interest as conditions evolve across reinsurance, with S&P Global Ratings pointing to favorable pricing and improved capacity for collateralized tail protection.

In a new report, S&P said catastrophe risk appetite could become more subdued through 2027 as reinsurance pricing softens, but it added that natural catastrophe risk in the sector remains under control. The rating agency projected that the industry’s benchmark group will keep capital levels aligned with its ratings.

S&P also argued that the reinsurance sector’s capitalization is likely to withstand severe industry-wide losses exceeding $300 billion without falling below key confidence levels. The agency said performance will depend on underwriting discipline and prudent risk appetite frameworks.

S&P expects retrocession usage to vary by player, and it estimated that as of January 1, 2026, its benchmark reinsurance group ceded roughly 50% of exposure to a 1-in-250 year event. The report also noted that the largest Group 1 reinsurers, including Hannover Re, Lloyd’s, Munich Re, SCOR, and Swiss Re, have generally reduced their use of collateralized tail retro protection over the past year, linked to shrinking reinsurance sidecars and other structures.

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