Best’s Market Segment Report: Reinsurance Capital Reaches New Highs as Risk Budgets Decline

OLDWICK, N.J.--(BUSINESS WIRE)--Total dedicated reinsurance capital is projected to grow to a new record level of USD 705 billion in 2026, reflecting the continued expansion of Bermudian reinsurers and diversification in capital deployment across the segment, according to a new AM Best report.

The Best’s Market Segment Report, “Reinsurance Capital Reaches New Highs as Risk Budgets Decline,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, life/annuity, health and regional reinsurance markets, will be available during August and September.

According to this report, global dedicated reinsurance capital increased by approximately 9% year over year to USD 663 billion in 2025, as traditional reinsurers generated another year of strong underwriting and investment earnings, allowing the industry to retain capital even as companies returned capital to shareholders and pursued growth opportunities. At the same time, the insurance-linked securities market continued to attract investors seeking exposure to insurance risk that remains relatively uncorrelated with broader financial markets.

“The continued accumulation of capital is particularly notable because it has not been accompanied by a corresponding increase in required capital, which remained relatively flat in 2025,” said Dan Hofmeister, associate director, AM Best. “This divergence between available and required capital has created increasingly substantial capital buffers across the sector and provides reinsurers with greater flexibility to absorb volatility, pursue growth opportunities, return capital to shareholders or redeploy capital into primary and specialty insurance markets.”

According to the report, catastrophe probable maximum loss (PML) exposure remained broadly stable during 2025, suggesting that the industry has not materially increased its aggregate catastrophe exposure despite the ongoing expansion of available capital. At the same time, catastrophe risk budgets, measured as catastrophe PML exposure relative to available capital, continued to decline.

“The decline in catastrophe risk budgets indicates that reinsurers are carrying less catastrophe exposure relative to the size of their capital bases,” said Patrick Cyphers, financial analyst, AM Best. “This provides additional protection against large loss events and increases the amount of capital available to support additional underwriting opportunities.”

Other report takeaways include:

• Traditional reinsurance capital increased to USD 540 billion at year-end 2025 from USD 500 billion at year-end 2024, representing another all-time high. An increase of 6.5% to USD 575 billion is projected for 2026.
• Third-party capital also reached a record level in 2025, increasing to USD 123 billion at year-end 2025 from the previous year. AM Best works in conjunction with Guy Carpenter to estimate the total amount of capital supporting the reinsurance industry. AM Best estimates traditional reinsurance capital; Guy Carpenter estimates third-party capital.
• The third-party reinsurance capital estimate for 2026 is estimated at USD 130 billion, driven predominantly by strong investor demand for catastrophe bonds and other insurance-linked securities.
• Bermudian reinsurers represented approximately 16% of the global reinsurance market capital in 2025, up from 15% in the prior year.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=367444.

For global reinsurance reports ahead of Rendez-Vous de Septembre, as well as video coverage of the event, please visit AM Best’s Reinsurance Information center.

Lastly, AM Best will host its annual reinsurance market briefing at Rendez-Vous de Septembre on Sept. 6, 2026, at 10:15 a.m. (CEST) in Monte Carlo. For more information, please visit the event website.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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