Category: Capacity and rating · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-05
Reinsurance capacity is the aggregate volume of reinsurance the market is willing to write at a point in time. It is determined by the capital base of traditional reinsurers, the availability of retrocession, and the appetite of alternative capital (ILS, sidecars, catastrophe bonds).
Category: Capacity and rating Also known as: RI capacity, reinsurance supply Related concepts: insurance capacity, reinsurance cycle, hard market, insurance-linked securities
Reinsurance capacity has historically been more volatile than primary insurance capacity, particularly in the catastrophe space, because:
The estimated global reinsurance capital was approximately $670bn at end-2023 (Aon Capital Report), of which approximately $100bn was alternative capital. Following major loss events (Hurricane Ian 2022, Turkey-Syria earthquake 2023), capacity in specific classes contracted materially.
Solvency II SCR sets the principal regulatory constraint on European reinsurers’ capacity. Bermuda Monetary Authority capital regulation governs Bermudian reinsurers. ILS structures are regulated under the Risk Transformation Regulations 2017 [1] (in the UK) or by similar offshore frameworks elsewhere.
Reinsurance capacity is renegotiated annually at the major renewal dates (1 January, 1 April, 1 June/July). Cedants present submissions; reinsurers commit (or do not commit) their capacity for the coming year; capacity gaps in any particular renewal are filled by alternative capital or new entrants.
The interplay between traditional and alternative capital is a defining feature of the modern reinsurance market. In soft conditions, alternative capital is plentiful and prices are competitive; in hard conditions, alternative capital may withdraw faster than traditional capital, creating sharp rate spikes.
An illustrative example: the global property catastrophe reinsurance capacity at the 1 January 2024 renewal stood at approximately $440bn of limit (per Aon estimates), an increase of 5 per cent over 2023 driven principally by re-engagement of alternative capital following the 2022 loss season. Capacity at 1 January 2023 had been materially tighter, reflecting capital withdrawals after Hurricane Ian.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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