S&P Global Ratings, a global credit rating agency that assesses the creditworthiness of organizations and financial instruments, said the insurance industry continues to face rising losses from extreme weather but has demonstrated strong overall financial resilience under severe stress scenarios.
Published on May 4, 2026 titled Chart shows how global insurance companies can cope with extreme natural disaster situations, S&P Global Ratings highlights that recent catastrophic events are increasing pressure on insurers and reinsurers to reassess risk.
The agency noted that Hurricane Ian in 2022 caused about $60 billion in damage, while the California wildfires the following year resulted in more than $40 billion in claims.
The report also pointed out that as of 2025, global insured losses have remained above US$100 billion per year for six consecutive years, reflecting the continued rise in the cost of natural disasters.
S&P Global Ratings explained that it conducted stress tests on major global insurers and reinsurers to assess performance under a hypothetical 1-in-250-year catastrophe.
“Our modeling shows that credit quality remains generally stable, primarily due to high capitalization and full utilization of reinsurance and retrocession. Our stress tests further emphasize that our credit ratings appropriately consider natural catastrophe risks,” said credit analyst Craig Bennett.
The agency’s findings suggest that even in this extreme scenario, most insurers’ ratings are likely to remain stable. S&P Global Ratings attributed this to a strong capital position, disciplined risk management and extensive use of reinsurance structures. The resilience of insurers depends largely on how efficiently they manage risk, the quality of reinsurance protection and the capital buffers they maintain, the report added.
S&P Global Ratings said companies with more concentrated risk profiles and less diversification may face greater pressures on capital strength and rating stability. The agency also highlighted the role of reinsurance and retrocession arrangements, which refers to the transfer of risk from one reinsurer to another, in reducing net losses.
Stress analysis shows that while the total catastrophe exposure faced by the largest insurers is large, the impact on net capital is significantly reduced through reinsurance protection and catastrophe-related premium income. S&P Global Ratings noted that generally speaking, expected losses from a once-in-250-year event represent a relatively small proportion of capital and can mostly be absorbed through continued earnings.
S&P Global Ratings further reported that average capital buffers will decline under extreme stress conditions but will generally remain sufficient to support existing ratings for most insurers. Only a small group will fall below capital levels consistent with current ratings after the stress test, although several others will retain only limited buffers.
The agency also observed that larger insurance groups tend to be less exposed to concentration risks and make relatively less use of reinsurance than smaller insurance groups. However, across the industry, reinsurance is still widely used and is considered a key factor in limiting the risk of severe loss events.
S&P Global Ratings added that catastrophe risk pricing helps reduce residual risk, although the impact of a once-in-250-year severe event will still be material for some insurers, particularly those with higher underwriting risk relative to capital strength. It notes that in some cases, group-level support may provide additional stability.
The report also noted that its ratings incorporate adjustments for natural catastrophe risk and broader capital and earnings volatility factors. S&P Global Ratings stressed that its analysis reflects a wider range of risks beyond weather-related events, including investment-related stress and other financial risks that affect the stability of insurers.
Overall, S&P Global Ratings concluded that while the frequency and magnitude of climate-related losses are increasing, most global insurers remain resilient to severe catastrophe scenarios, supported by strong capital, risk management practices and broad reinsurance protection.
