S&P Global Ratings, a global credit rating agency that assesses the creditworthiness of organisations and financial instruments, has said the insurance sector continues to face rising losses from extreme weather, while still showing strong overall financial resilience under severe stress scenarios.
In a report published on 4 May 2026 entitled Charts Show Global Insurers Can Manage Extreme Natural Disaster Scenarios, S&P Global Ratings highlights that recent catastrophe events are increasing pressure on insurers and reinsurers to reassess risk.
The agency points to Hurricane Ian in 2022, which caused about US$60 billion in damage, and the California wildfires in the following year, which resulted in more than US$40 billion in claims.
It also notes that insured global losses have remained above US$100 billion annually for six consecutive years up to 2025, reflecting a sustained period of elevated natural catastrophe costs.
S&P Global Ratings explains that it conducted stress tests on global primary insurers and reinsurers to evaluate performance under a hypothetical 1-in-250-year catastrophe.
It reports that “Our model shows that credit quality remains broadly stable, largely due to high capitalszation and ample use of reinsurance and retrocession. Our stress test further highlights that our credit ratings appropriately incorporate exposure to natural catastrophes,” according to Credit Analyst Craig Bennett.
The agency’s findings indicate that most insurer ratings would likely remain stable even under such an extreme scenario. S&P Global Ratings attributes this to strong capital positions, disciplined risk management and extensive use of reinsurance structures. It adds that insurers’ resilience is largely shaped by how effectively they manage exposure, the quality of their reinsurance protection and the capital buffers they maintain.
According to S&P Global Ratings, firms with more concentrated risk profiles and weaker diversification may experience greater strain on capital strength and rating stability. The agency also emphasises the role of reinsurance and retrocession arrangements in reducing net losses, with retrocession referring to the transfer of risk from one reinsurer to another.
The stress analysis suggests that while gross exposure to catastrophe risk is significant across the largest insurers, the effect on net capital is substantially reduced through reinsurance protection and catastrophe-related premium income. S&P Global Ratings notes that, in general, expected losses from a 1-in-250-year event would represent a relatively small proportion of capital and could largely be absorbed through ongoing earnings.
S&P Global Ratings further reports that average capital buffers would decline under extreme stress conditions but would typically remain sufficient to support existing ratings for most insurers. Only a small minority would fall below capital levels consistent with their current ratings after stress testing, although several others would retain only limited buffer capacity.
The agency also observes that larger insurance groups tend to be less exposed to concentrated risks and make comparatively less use of reinsurance than smaller peers. Across the sector, however, reinsurance remains widely used and is considered a key factor in limiting exposure to severe loss events.
S&P Global Ratings adds that catastrophe risk pricing helps reduce residual exposure, although the impact of a severe 1-in-250-year event could still be material for some insurers, particularly those with higher underwriting risk relative to capital strength. It notes that group-level support may provide additional stability in certain cases.
The report also states that its ratings incorporate adjustments for exposure to natural catastrophe risk as well as broader capital and earnings volatility factors. S&P Global Ratings stresses that its analysis reflects a wider set of risks beyond weather-related events, including investment-related pressures and other financial risks affecting insurers’ stability.
Overall, S&P Global Ratings concludes that although climate-related losses are increasing in frequency and scale, most global insurers remain well positioned to withstand severe catastrophe scenarios, supported by strong capitalisation, risk management practices and extensive reinsurance protection.
