Three major reinsurers have withdrawn from the US medical reinsurance market in recent months, Gallagher Re has disclosed, in what the broker characterized as a structural adjustment rather than a sign of systemic distress.
Gallagher Re said it had already secured replacement capacity for some affected clients at improved terms, noting that overall capacity remains sufficient, buoyed by a wave of new entrants in recent years.
The broker cautioned, however, that rate hardening and higher retentions are anticipated, with insurers likely needing to reassess capital management strategies over the course of 2026.
The exits unfold against a backdrop of mounting pressure on healthcare economics. Fitch Ratings expects commercial group medical cost growth to approach 9% in 2026 - the highest level in more than a decade.
An Aegis Risk survey published in 2025 found that stop-loss premiums had risen between 8.8% and 10% that year, while claims exceeding $1 million were reported by 49% of self-funded plans, up from 23% in 2024.
The global health and medical reinsurance market was valued at roughly $70.53 billion in 2024, Research and Markets estimated previously, projecting it would reach $103.25 billion by 2029 at a compound annual growth rate of 8.2%.
Gallagher Re identified four areas of impact. Pricing discipline is expected to tighten across employer stop-loss, group healthcare plans, the ACA individual market, and Medicare Advantage/Medicaid.
Reinsurer appetite for quota share arrangements – where profitability has faced the most strain – is projected to decline, with higher attachment points and stricter underwriting standards anticipated.
Capital efficiency is becoming a more pressing concern for smaller and midsized healthcare plans. The National Association of Insurance Commissioners (NAIC) has flagged rising medical loss ratios driven by increased utilization, high prescription drug costs, and healthcare inflation.
On the product side, Gallagher Re pointed to the emergence of trend risk corridors, multi-year structured solutions, and population health-linked reinsurance. Alternative risk transfer is also accelerating, with captive structures and insurance-linked securities enabling insurers to cede healthcare plan risk for regulatory capital relief.
Bespoke products targeting high-cost treatments, such as carve-out covers for CAR-T cell cancer immunotherapies, are seeing increased demand.
Historically, reinsurance market withdrawals have tended to cluster when rising medical costs and underpricing collide. Academic research has estimated reinsurance price cycles at approximately nine years, while analysts have noted the current broader cycle, which peaked post-2023, is softening amid record capital levels exceeding $700 billion globally, Markel noted in its 2026 outlook.
"Markets do not disappear - they restructure," Gallagher Re said.
