--- title: capital is not the shortage canonical_url: https://ensurance.app/guide/capital-is-not-the-shortage markdown_url: https://ensurance.app/guide/capital-is-not-the-shortage.md subtitle: reinsurance capacity is at a record. the loss trend keeps climbing underneath it category: nature-finance --- # capital is not the shortage *reinsurance capacity is at a record. the loss trend keeps climbing underneath it* The reinsurance market ended 2025 holding more capital than at any point on record, and prices have been falling at renewals since January 2025. The supply side is not short of money. What keeps rising is the trend and modeled cost of the losses that money is there to pay, even in years like 2025 when actual losses came in under trend. A large part of that cost is set somewhere no reinsurance contract reaches: the fuel in a forest above a town, the floodplain upstream of a city, the marsh in front of a coastal street, the reef crest off a beach. That forest, floodplain, marsh and reef do their work whether anyone pays for them or not. Public agencies and land trusts already fund some of it. The loss-bearers, in the main, do not. This post answers what **reinsurance capacity** means and where it stands in 2026, in the market's own numbers. Then it asks a narrower question: of all this capital, how much is paid to lower the loss instead of to carry it? :::johnson **capital is not the shortage. the loss trend is rising underneath it.** Record capacity and softer prices are good news for cedents. They do nothing to the trend in what the ground under the exposure will let a storm or a fire cost. [See what a reinsurer can fund before the season →](/guide/what-a-reinsurer-can-fund-before-the-season?from=guide) ::: ## what reinsurance capacity is **Reinsurance capacity** is the limit the reinsurance market can write, backed by the capital behind it. It comes from two places. **Traditional capacity** is the balance sheets of reinsurers: equity and surplus that back treaty and facultative contracts. **Alternative capital** is investor money posted as collateral: catastrophe bonds, collateralized reinsurance, sidecars and other insurance-linked structures. Together they set how much limit a cedent can buy, at what attachment, and at what rate on line (premium as a share of limit). When capital grows faster than the risk on offer, price falls. That is where the market is now. The instruments have their own pages: [what a catastrophe bond actually is](/guide/what-a-catastrophe-bond-actually-is?from=guide), [why insurance-linked securities are still insurance](/guide/insurance-linked-securities-are-still-insurance?from=guide), and [how a sidecar funds the book](/guide/a-sidecar-funds-the-book?from=guide). This post stays on the total and the cycle. ## the capital is at a record Three sources, different counts, one direction. | measure | figure | source | |---|---|---| | Global reinsurance capital, year-end 2025 | USD 785bn (traditional USD 649bn, alternative USD 136bn) | Aon, 2026 | | Dedicated reinsurance capital, full-year 2025 | USD 648bn, up 11% | Gallagher Re, 2026 | | Demand for reinsurance, 2025 | up about 1.4% | Gallagher Re, 2026 | | Cat bond issuance, 2025 | USD 25.6bn, a record (144A and private) | Artemis, 2026 | | Cat bonds outstanding | USD 61.3bn at year-end 2025; USD 65.6bn at end-June 2026 | Artemis, 2026 | Aon's USD 785bn and Gallagher Re's USD 648bn are not two estimates of the same thing. They define reinsurance capital differently, so do not subtract one from the other. Both say capital is at a high. Cat bonds sit inside Aon's alternative capital, as we read it; don't add the rows. The Gallagher Re pair is the one to hold: capital up 11% against demand up about 1.4%. Supply is growing far faster than demand. Returns were strong. For the reinsurers Gallagher Re tracks, reported return on equity was about 20% in 2023 and 19.3% in 2025 (13.5% underlying). ## the price follows the capital At 1/1/2023, after the hard reset, Guy Carpenter's global property catastrophe rate-on-line index rose 27.5%, the largest rise since 2006, and its US index hit an all-time high. Guy Carpenter noted the index understated the change, because retentions also rose. Two years later the direction reversed. At 1/1/2025 the same index fell 6.6%, its first fall since 2017. At 1/1/2026 Howden Re measured property catastrophe pricing down 14.7% risk-adjusted, the largest fall since 2014, with retrocession (reinsurance bought by reinsurers) down 16.5%; Guy Carpenter's global index fell about 12%. At the 6/1/2026 Florida renewals, Howden Re reported risk-adjusted declines of up to 25%. Fitch kept its outlook for global reinsurance at "deteriorating" for 2026, and S&P said pricing has peaked. Howden Re warned that another Florida renewal like 2026 could push large segments of the market below their cost of capital by 2027. None of this is bad behavior. Abundant capital is what a cedent's reinsurance buyer has wanted since 2023: more limit, lower rates, room to bring some cover back down the tower. Policyholders gain when that reaches primary prices. The risk is narrower. It is pricing that falls below the loss trend. ## the loss underneath keeps its trend Price follows capital. The loss cost follows something else. Swiss Re Institute's sigma puts the trend in insured natural catastrophe losses at 5% to 7% a year in real terms, and says that trend implies about USD 148bn of insured losses for 2026. In 2025 insured losses came in at about USD 107bn against a trend figure of about USD 145bn, and a record 92% of them came from secondary perils: severe convective storm, flood and wildfire. Severe convective storm was USD 51bn of that USD 107bn, and it is weather. Wildfire and flood are the ground-influenced share, and in Verisk's modeled average annual loss they are 6% and 7%. The Los Angeles wildfires, at about USD 40bn, were the largest insured wildfire loss on sigma's records. They were wind-driven and ran through shrub, grass and houses; forest fuel work would not have stopped them. The modeled view points the same way. Verisk puts modeled global insured average annual loss at USD 171bn for 2026, up from USD 152bn in 2025 and USD 59bn in 2012. Verisk's figures are modeled, so growth includes exposure growth. Aon counts 2025 as the sixth straight year with insured losses above USD 100bn. Gallagher Re estimated insured catastrophe losses for the first nine months of 2026 at about USD 92bn, the lowest since 2019. A quiet nine months is real relief, though the season is not over and the modeled average keeps climbing. Swiss Re attributes most of the growth to exposure (more value in harm's way, urbanization, rebuild costs), with climate change amplifying some perils and regions. Exposure sits on top of the ground. Where a town sits in a fire-adapted forest, a floodplain or a low coast, the condition of that ground decides a share of what the exposure costs when the event arrives. | what moves | what drives it | what it tracks | |---|---|---| | Reinsurance price | Capital supply, recent loss experience | The last few years | | Insured loss cost | Exposure, hazard, the condition of the ground | 5% to 7% real a year (Swiss Re), driven mostly by exposure | ## capital priced on the loss, capital that lowers it That capital also backs casualty, specialty and non-cat lines. The part that stands behind natural catastrophe is priced on the loss: it earns a margin for standing behind the event, and it pays when the event comes. That is the job, and it does it well: it spreads peak risk around the world, recapitalizes a cedent after the bad year, and keeps primary markets writing. We found no reinsurer funding restoration to lower its own loss outside the parametric reef covers, which pay after a storm (see the next post). This does nothing for casualty reserves, social inflation, cyber or war. Nor does it touch the peak tail: a thinned forest does not stop a Category 5 at landfall, and a marsh does not change an earthquake. But the secondary perils that made up a record share of 2025's insured loss are partly set by named living systems. Fuel load in a forest changes how a wildfire runs toward the houses below. A floodplain left open takes water that would otherwise reach the street. A marsh slows waves before they reach the door. A reef crest breaks them offshore. The field has modeled this with the industry's own tools: for one modeled landscape in California's Northern Sierra, The Nature Conservancy and WTW found ecological forestry cut wildfire average annual loss by 40% to 60% (2021), and Narayan and colleagues found salt marshes in Ocean County, New Jersey, cut average annual flood losses by 16% (2017). Those are modeled field results, not booked savings. A small, steady share of capital aimed at that ground is a different kind of capital. It works before the season, not after the event. A thinned forest needs re-treating as fuel regrows, so the funding is steady, not one-off. A marsh kept is a marsh still there. It does not wait for a trigger. It reaches the term in the loss that capital priced on the loss leaves alone. How the with-and-without difference is measured, same events and same exposure run twice, is in [how an intervention lowers the loss](/guide/how-an-intervention-lowers-the-loss?from=guide). ## where ensurance fits **[Ensurance](/specific?from=guide)** is how that share reaches a named place. A capital provider or a carrier funds the condition of a specific forest, floodplain, marsh or reef through a **certificate**: a record tied to that one place, so the funder can see what was paid for and how the ground is doing, which a grant letter does not show. It is not reinsurance and it does not add reinsurance capacity. Ensurance does not reinsure anyone, hold tail risk or pay claims. It sits beside the capital stack, not in it. No reinsurer has yet booked a loss reduction funded through ensurance. The evidence above is the field's, named and dated. The question is not whether there is enough capital. It is whether a sliver of it should go to the ground the loss comes from. Capital providers can start at [/solutions/capital-providers](/solutions/capital-providers?from=guide&topic=reinsurance); carriers and reinsurance buyers at [/solutions/insurers](/solutions/insurers?from=guide&topic=reinsurance). ## frequently asked questions ### what is reinsurance capacity? Reinsurance capacity is the limit the reinsurance market can write, backed by traditional reinsurer balance sheets plus alternative capital such as catastrophe bonds, collateralized reinsurance and sidecars. Aon put global reinsurance capital at a record USD 785bn at year-end 2025. ### is there too much reinsurance capital? Not for cedents, who get more limit at lower prices. But Gallagher Re put capital up 11% in 2025 against demand up about 1.4%, and Howden Re warned of pricing below cost of capital by 2027. ### why are reinsurance rates falling if the loss trend is rising? Price tracks capital supply and recent loss experience. The insured loss trend, which Swiss Re puts at 5% to 7% a year in real terms, keeps climbing underneath, so a run of soft renewals can price below it. ### does ensurance add reinsurance capacity? No. Ensurance funds the condition of a named place before the season. It does not reinsure, hold tail risk, pay claims or replace reinsurance capital. ### has a reinsurer booked a loss reduction from ensurance? No. The modeled reductions cited here come from the field's own studies. No reinsurer has booked an ensurance-funded loss reduction. --- **Read next:** [what a reinsurer can fund before the season](/guide/what-a-reinsurer-can-fund-before-the-season?from=guide), and how it is measured. ## sources [Aon via Reinsurance News, new highs for traditional and alternative capital, 2026](https://www.reinsurancene.ws/new-highs-for-traditional-alternative-takes-global-reinsurer-capital-to-record-785bn-aon/) — Global reinsurance capital USD 785bn at year-end 2025 (traditional USD 649bn, alternative USD 136bn) [Gallagher Re, reinsurance market report: full-year 2025 results, 2026](https://www.ajg.com/gallagherre/news-and-insights/reinsurance-market-report-results-for-full-year-2025/) — Dedicated capital USD 648bn, up 11%; demand up about 1.4% [Gallagher Re via Reinsurance News, reinsurers' ROEs exceed cost of capital, 2026](https://www.reinsurancene.ws/reinsurers-roes-now-comfortably-exceed-the-industrys-cost-of-capital-gallagher-re/) — Reported ROE 19.3% and underlying 13.5% in 2025; about 20% reported in 2023 [Artemis, cat bond issuance breaks full-year records, 2026](https://www.artemis.bm/news/catastrophe-bond-issuance-breaks-q4-and-full-year-records-market-grows-24-report) — Record USD 25.6bn issued in 2025; USD 61.3bn outstanding at year-end [Artemis, cat bond records fall again in H1 2026, 2026](https://www.artemis.bm/news/cat-bond-market-shows-high-bars-are-set-to-be-broken-as-records-fall-again-in-h1-2026-report/) — USD 65.6bn outstanding at end-June 2026 [Guy Carpenter via Reinsurance News, property cat rates on line up 27.5% at 1/1, 2023](https://www.reinsurancene.ws/global-property-cat-rates-on-line-up-27-5-at-jan-1-renewals-guy-carpenter/) — Largest rise since 2006; US index at an all-time high; index understates because retentions rose [Guy Carpenter, January 1 2025 renewals news release, 2025](https://guycarp.com/content/dam/guycarp-rebrand/pdf/pressreleases/News-release-Jan-1-2025-renewals.pdf) — Global rate-on-line index down 6.6%, first fall since 2017 [Howden Re via Artemis, property cat down 14.7% at January 2026 renewals, 2026](https://www.artemis.bm/news/property-cat-reinsurance-down-14-7-retrocession-down-16-5-at-jan-2026-renewals-howden-re) — Risk-adjusted property cat down 14.7%, retro down 16.5%; Guy Carpenter global down about 12% [Howden Re via Reinsurance News, rate declines accelerate at June 1, 2026](https://www.reinsurancene.ws/property-cat-rol-declines-accelerate-at-june-1-reinsurance-renewal-howden-re/) — Florida risk-adjusted declines up to 25%; cost-of-capital warning for 2027 [Insurance Business, Fitch maintains deteriorating outlook for global reinsurers, 2026](https://www.insurancebusinessmag.com/reinsurance/news/breaking-news/fitch-maintains-deteriorating-outlook-for-global-reinsurers-in-2026-561486.aspx) — Fitch "deteriorating" outlook; S&P "pricing has peaked" [Swiss Re Institute, sigma 1/2026: natural catastrophes in 2025, 2026](https://www.swissre.com/institute/research/sigma-research/sigma-2026-01-natcat-2025-wildfire-storm-risk.html) — Insured losses about USD 107bn against a trend of about USD 145bn; 92% from secondary perils; severe convective storm USD 51bn; LA wildfires about USD 40bn; trend 5% to 7% real, about USD 148bn for 2026 [Verisk, global insured catastrophe losses now expected to average USD 171 billion, 2026](https://www.verisk.com/company/newsroom/global-insured-catastrophe-losses-now-expected-to-average-$171-billion-annually-verisk-finds/) — Modeled insured AAL USD 171bn; USD 152bn in 2025; USD 59bn in 2012; wildfire 6% and flood 7% of modeled AAL [Aon via Insurance Journal, 2025 insured catastrophe losses, 2026](https://www.insurancejournal.com/news/international/2026/01/21/855026.htm) — Sixth straight year of insured losses above USD 100bn, by Aon's count [Gallagher Re via Artemis, global insured cat losses at USD 92bn for 9M26, 2026](https://www.artemis.bm/news/gallagher-re-estimates-global-insured-cat-losses-at-92bn-for-9m26-lowest-since-2019/) — Lowest nine-month insured total since 2019 [Swiss Re via Risk & Insurance, nat-cat losses set to reach USD 145 billion, 2025](https://riskandinsurance.com/natural-catastrophe-losses-set-to-reach-145-billion-in-2025-with-1-in-10-risk-of-300-billion-peak-year/) — Loss growth mostly exposure; climate change amplifies some perils and regions [The Nature Conservancy and WTW, wildfire resilience insurance, 2021](https://wtwco.com/en-US/Insights/2021/07/wildfire-resilience-insurance-quantifying-the-risk-reduction-of-ecological-forestry-with-insurance) — Northern Sierra ecological forestry, modeled AAL down 40% to 60% [Narayan et al., Scientific Reports 7:9463, 2017](https://doi.org/10.1038/s41598-017-09269-z) — Ocean County, New Jersey salt marshes cut average annual flood losses 16%, modeled with industry catastrophe models ## the series 1. [what reinsurance cannot cede](/guide/what-reinsurance-cannot-cede?from=guide) 2. [secondary perils are not secondary](/guide/secondary-perils-are-not-secondary?from=guide) 3. [the loss moved down the tower](/guide/the-loss-moved-down-the-tower?from=guide) 4. [the model learns from a past that is leaving](/guide/the-model-learns-from-a-past-that-is-leaving?from=guide) 5. [capital is not the shortage](/guide/capital-is-not-the-shortage?from=guide) 6. [what a reinsurer can fund before the season](/guide/what-a-reinsurer-can-fund-before-the-season?from=guide)