Insurers Adopt Facultative Reinsurance for Global Growth
A new survey by Willis reveals that 60% of insurers plan to increase their use of facultative reinsurance as a soft market fuels global expansion. This shift comes despite growing risks, with insurers leveraging the tool to manage both growth and the exposures that come with it.
The Willis Facultative Global Survey 2026 gathered insights from 380 senior decision-makers at property and casualty insurance firms across North America, EMEA, Asia-Pacific, and Latin America. Each respondent company carried gross written premium of more than $1 billion, highlighting the significant scale and impact of the surveyed entities.
Strategic Shift in Facultative Reinsurance Use
The survey highlights a change in how insurers view facultative reinsurance. Historically seen as a last resort for problem risks, it’s now a key strategic tool. Only 22% of respondents consider it a last resort, down from 28% in 2024. Meanwhile, 82% see it as essential for managing risk, capacity, capital, and appetite, reflecting its growing importance in strategic planning.
Capital management is the primary driver, with 52% of respondents citing it as a reason for buying facultative reinsurance, up from 44% in 2024. Insurers are deploying reserves accumulated during the hard market to fuel expansion, using facultative reinsurance to efficiently manage their capital while pursuing growth opportunities.
Global Expansion and Market Forces
Global expansion is a top opportunity for 56% of insurers, up from 39% two years ago. Over half also aim to enter new markets and increase capacity, driven by softening rates and abundant capital. This trend has led to regional insurers from the Middle East and Asia writing business in Latin America, illustrating the global reach of expansion efforts.
The demand for facultative reinsurance is strong, with 60% planning to buy more in the next two years, compared to just 13% expecting to buy less. This imbalance shows the critical role facultative reinsurance plays in supporting insurers’ growth strategies. However, this increased demand has intensified competition among underwriters, particularly in North American property rates, which have dropped by up to 40% year-on-year in 2026. Cedants are using facultative reinsurance to extend line sizes and participate in programs they would otherwise be unable to lead, further driving volume but putting downward pressure on pricing.
In contrast, North American casualty rates, especially in auto, are hardening due to claims inflation from nuclear verdicts. Facultative rates for auto coverage have risen 20 to 30%, compared to roughly 10% for primary insurance. This disparity forces cedants to decide whether to transfer risk at a higher cost or retain it while their balance sheets remain strong. European insurers with US casualty exposure face the same pressure, often using facultative reinsurance to manage volatility across different market conditions.
Emerging Risks and Market Concerns
The survey highlights growing concerns about emerging risks, with 57% citing geopolitics, 54% cyber and data privacy, 40% climate, and 56% AI and automation liability. Cyber and data privacy concerns jumped to 54%, up from 24% two years ago, while data quality concerns rose in parallel, from 28% to 43%, reflecting unease about the risk quality of business written during expansion.
These risks could amplify losses, especially during a major event. Concern about sudden market reversals has nearly doubled since 2024, with 52% now naming market conditions as a barrier to addressing challenges. This heightened awareness shows the delicate balance insurers must strike between pursuing growth and managing potential downsides.
