Speaking at this year’s Rendez-Vous de Septembre in Monte Carlo, senior analysts from S&P Global Ratings, a provider of credit ratings and financial analysis, set out their view of the reinsurance market’s biggest structural challenges and opportunities, from the widening protection gap to the fast-growing exposures created by AI-driven data centres.
The briefing, titled Global Reinsurance Highlights 2026, featured Johannes Bender, Director at S&P Global Ratings; Neil Stein, Managing Director and Sector Lead; Simon Ashworth, Chief Analytical Officer for Insurance Credit Ratings; and Maren Josefs, Associate Director, Insurance Ratings.
Opening on the numbers, Josefs set out how far the alternative capital market has expanded. Third-party capital now stands at USD $140 billion, up from USD $90 billion five years ago, with roughly USD $65 billion channelled through platforms and just over USD $20 billion through sidecars, the remainder largely made up of private collateralised transactions.
She pointed to the catastrophe bond market and casualty sidecars as the two main growth stories, noting that cat bond issuance hit a record USD $24.5 billion last year, up from USD $17 billion the year before, with a further USD $19 billion issued so far this year.
Coverage has also broadened well beyond the traditional US hurricane and earthquake perils, with recent deals covering German floods, Californian wildfires, convective storms and multi-peril risks in Canada, and the number of sponsors active in the market has climbed to around 120, up from just 17 five years ago.
It is against this backdrop of expanding capacity that Josefs framed the industry’s central challenge: “The protection gap between economic and insured losses is still widening across the globe, and at the same time we have these new risks coming from geopolitics, climate, and technology advances, especially AI.”
Bender picked up the theme directly, confirming just how wide that gap remains on the natural catastrophe side. He told delegates: “We’re at 60% as of half year. That’s a huge protection gap on natural catastrophe losses.”
He went on to argue that the sector has several routes to narrow that gap, saying: “The sector continues to have the ability to shrink that gap, being it with own capacity, convergent capital, or with government, so there’s plenty of opportunities for growth.” At the same time, he was careful to stress that “cautiousness and conservatism is key, in particular with regard to changing of these loss patterns.”
Turning to newer lines, Bender described cyber as “clearly a growth area, although the growth also has stopped in the last two years because of also a softening market environment and also a cautious approach from the sector,” adding that “we believe that line of business will have above average growth rates in the next years, and the reinsurance sector can play a significant role in that context.”
The most striking example he raised, though, was the exposure now building up around data centres and hyperscalers. He said: “It’s such an enormous increase of exposure that is coming from these developments that we initially estimated that with the existing line limits, there could be an additional USD $10 billion of additional premium just coming from these hyperscalers exposures, and that does not include yet potential increase of line sizes.”
On the risk this creates, he added: “The accumulation risk is really big in these data centres, so that’s really the big challenge in that context, but we also understand the industry should work on solutions to get the insurance gap smaller, in particular for these big data centres.”
Bender suggested the response may ultimately mirror the debate already under way on natural catastrophe risk, noting “it’s going to be the same debate as for some areas on the national catastrophe side, just to shrink the protection gap.”
He added that S&P’s company-by-company approach to assessing risk appetite and limits means “we usually broadly know what’s the exposure. That’s why we can give projections also with regard to tail risk.”
Closing out the discussion, he acknowledged the subject was far from settled, saying: “It’s really one of the hot topics, and therefore we will discuss it next year again.”
