Reinsurers are expected to face another year of excess capacity and margin pressure in 2026, but some market participants see scope for more tailored solutions and new forms of risk transfer.
Christopher Gray (pictured above), divisional director, reinsurance, at Westfield Specialty International, said the global market remains characterized by “too many reinsurers chasing too few buyers”, a dynamic that continues to weigh on pricing and keep conditions soft.
He expects that “the overall direction of travel” next year will still be shaped largely by this surplus capacity.
Gray said reinsurers will need to hold underwriting discipline if they are to navigate 2026 profitably. While he believes rate adequacy has “broadly been maintained overall,” he noted that margins remain under pressure, especially in property catastrophe business.
Analysts at EY say this environment reflects a broader, capital-rich market, with the global reinsurance sector entering 2026 with record capital and alternative capital now making up about 17% of the total.
Macroeconomic conditions are adding to that squeeze. Gray highlighted the combination of low growth in many economies and elevated inflation as a “new normal” that has persisted for several years and is now a key differentiator from previous soft markets, increasing the challenge of protecting underwriting margins and maintaining reserve adequacy.
Reinsurers are also absorbing recent loss activity. Gray pointed to an estimated $45–$50 billion of losses from severe convective storms in 2025, which have offset the benefit of a benign North Atlantic hurricane season. He said such events are pushing up costs in an environment where reinsurers “cannot” simply rely on rising rates to recoup them.
Artex Risk’s figures suggest the sector has the balance sheet strength to absorb these shocks, with dedicated global reinsurance capital estimated at about $805 billion at the end of the second quarter of 2025 and traditional capital projected to grow roughly 8% for the year.
At the same time, severe convective storm losses of about $42 billion through September, averaging more than $1 billion per event and running around 31% higher than the previous decade’s average per-event cost.
Consolidation in the primary insurance sector is another source of pressure. Gray said the current M&A cycle is typical for this stage of the market, but each deal can reduce the number of standalone cedents and compress the reinsurance client base.
Despite these headwinds, Gray sees room for growth in more specialized and structured solutions. He cited situations where margin pressure leads insurers to sell or restructure portfolios, creating opportunities for reinsurers to offer reinsurance to close transactions, loss portfolio transfers or adverse development covers.
He described “creative” as his reinsurance “buzz word” for 2026 and argued that reinsurers will need to be “smart thinkers” to succeed. In practice, he said this means providing multiclass expertise, building cross-class relationships and developing new products that align more closely with buyers’ needs.
According to Gray, that shift requires a sharper focus on what clients actually want to buy. He said reinsurers should move away from standardized commodity products and concentrate on solutions that respond directly to cedents’ risk and capital considerations.
Artificial intelligence is one area where he sees that dynamic unfolding. Gray said Westfield Specialty is “actively discussing with several insurers” how a move toward more AI-led underwriting will alter their risk profile and whether some of that evolving risk should be reinsured.
He described this AI-related work as an “interesting solution to a new problem” and linked it to the kind of innovation traditionally associated with the London reinsurance market.
Looking ahead, Gray said one theme stands out for 2026: reinsurance will need to demonstrate its value more clearly to buyers or “clients will retain more risk,” reducing demand for traditional capacity.
