Every insurer you buy a policy from relies on reinsurance in the background. Reinsurance capacity and pricing shape how much coverage primary insurers can offer and at what price, especially for property in catastrophe-exposed regions. This overview explains how the market is structured and where it stands in 2026.
What reinsurance does
The NAIC describes reinsurance as "insurance for insurance companies": an insurer (the cedent) transfers all or part of its risk to a reinsurer, directly or through a broker. Reinsurers can in turn buy their own protection, called retrocession. Insurers use reinsurance to expand underwriting capacity, stabilize results, protect against catastrophes, exit lines of business and gain expertise. Cover can be bought risk by risk (facultative) or for whole portfolios (treaty), on a proportional or non-proportional basis.
How much capital is available
Aon estimates that global reinsurance capital reached a record $800 billion at June 30, 2026, up from $785 billion at the end of 2025, driven mainly by retained earnings. The total splits into traditional reinsurer equity and third-party (alternative) capital from investors:
| Measure (Aon, as of June 30, 2026) | Amount |
|---|---|
| Global reinsurance capital | $800 billion |
| Third-party (alternative) capital | $144.5 billion |
| Catastrophe bonds outstanding | $63.4 billion (about 17% above a year earlier) |
| Catastrophe bond issuance, first half of 2026 | $17.3 billion |
| Reinsurance sidecars outstanding | $23 billion (up about 35% from $17 billion) |
Catastrophe bonds, which the NAIC defines as bonds whose value or structure changes if the issuer's disaster losses exceed a set size, have become a mainstream source of property catastrophe capacity. Sidecars let investors share directly in a reinsurer's portfolio.
Profitability: a strong run
Reinsurers are in a very profitable phase. Aon reports an average combined ratio of 85.4% for 19 global reinsurers in the first half of 2026, down from 94.8% in the first half of 2025, and an annualized average return on equity of 15.5% across 31 reinsurers, well above their estimated cost of equity. Aon describes 2026 as on course to be the fourth consecutive year of strong results, absent unusually large losses.
How the US regulates foreign reinsurers
Reinsurance is global by nature. According to the NAIC, most reinsurance premiums are reinsured outside the United States. US rules determine whether a ceding insurer can take credit on its balance sheet for reinsurance:
- Licensed and authorized reinsurers are regulated like other insurers; no collateral is needed.
- Unlicensed (alien or offshore) reinsurers generally must post 100% collateral.
- Certified reinsurers from qualified jurisdictions can post reduced collateral after additional state review.
- Reciprocal jurisdiction reinsurers need no collateral. Under the US–EU and US–UK covered agreements, qualifying reinsurers must hold the equivalent of $250 million in own funds and 100% of their Solvency II capital requirement. All 56 US jurisdictions had adopted the implementing NAIC models by September 2022.
Bermuda and Lloyd's
Bermuda is a major domicile for reinsurers and insurance-linked securities, supervised by the Bermuda Monetary Authority (BMA). The BMA continues to develop its framework; in September 2026 it consulted on a phased resolution regime for commercial insurers and on a new insurer class for parametric special purpose insurance. Aon notes that investors reach the reinsurance market through platforms such as Lloyd's and Bermuda.
Lloyd's of London, which began in a coffee house in 1688, is a marketplace of more than a hundred syndicates. It reported gross written premium of £34.7 billion and a combined ratio of 90.8% for the first half of 2026, and it is rated A+ (Superior) by AM Best and AA- by S&P and Fitch.
Renewals: a buyer-friendly market
Many reinsurance treaties renew on fixed dates, and January 1 is a key one. With record capital, conditions have shifted toward buyers. Aon reports that buyer-friendly conditions accelerated through 2026, with double-digit pricing reductions and more flexible terms for most property placements, particularly for US risks, and that capacity is expanding across multiple lines ahead of the January 2027 renewals.
For primary insurers, cheaper reinsurance lowers the cost of catastrophe protection, which can eventually ease pressure on property premiums. It also increases competition, a theme we cover in underpricing and the insurance cycle.
What it means for buyers
- Homeowners and businesses in catastrophe-exposed areas benefit most when reinsurance is plentiful, though local factors still drive price.
- Large commercial, energy and marine risks often need facultative support; good submissions get better terms.
- Check the security of the insurer and its reinsurers (see financial strength ratings).
Polis Re supports reinsurance placement for property, energy, transport and liability risks. Contact us at info@polisre.com or +1 929 207 0015.