Insurers are deploying more facultative reinsurance than ever, but not because they feel secure. A new survey from Willis finds that the growth driving demand is also creating the exposures that demand is meant to manage.
The Willis Facultative Global Survey 2026 drew responses from 380 senior decision-makers at property and casualty insurance companies across North America, EMEA, Asia-Pacific, and Latin America. Each respondent company carried gross written premium of more than $1 billion. The findings show a market in which capital abundance and softening rates are pushing insurers into unfamiliar geographies and risk classes, while the risks that could reverse those conditions are growing more acute.
The report's central finding is a shift in how insurers use facultative reinsurance. Historically treated as a defensive measure for problem risks and treaty gaps, it is now being used as a strategic tool for expansion. Only 22% of respondents described facultative as a last resort, down from 28% in 2024, while 82% said it is a key part of their strategy for managing risk, capacity, capital and appetite.
Capital management was the top driver of facultative buying in 2026, named by 52% of respondents, up from 44% in 2024. Insurers are sitting on reserves built during the hard market and need to put that capital to work.
Global expansion, meanwhile, was cited as a top opportunity by 56%, up from 39% two years ago, with more than half also naming entering new markets and increasing capacity as top strategic objectives. Willis noted that many regional insurers from the Middle East and Asia are now writing business in Latin America as a direct result of these expansion pressures.
The demand trajectory points the same way. Among those surveyed, 60% said they plan to buy more facultative reinsurance over the next two years, against just 13% who expect to buy less, a ratio of more than four to one.
The pattern has a direct market implication for underwriters. North American property rates have fallen as much as 40% year on year in 2026, according to the Willis report, creating intense competition for placement share. Cedants are using facultative to extend line sizes and participate in programmes they would not otherwise be able to lead. That increases volume but puts downward pressure on pricing and requires reinsurers to work harder to distinguish between portfolios.
The report draws a clear line between property and casualty. While most lines are softening, North American casualty continues to harden, particularly in auto, where nuclear verdicts are driving claims inflation. Facultative rates for auto coverage have risen 20 to 30%, compared with roughly 10% for primary insurance. That gap is forcing cedants to decide whether to transfer the risk at elevated cost or retain it while balance sheets are healthy.
European insurers with US casualty exposure face the same pressure and many use facultative to manage that volatility. Cedants in that position may find their reinsurance programme straddling very different market conditions, depending on which lines are in scope.
The survey's most pointed findings for reinsurers may be the escalation of concern about emerging risks. Geopolitics was named by 57% as a top emerging concern, up from 52% in 2024. Cyber and data privacy jumped to 54%, up from 24% two years ago. Climate and extreme weather rose to 40% from 30%. AI and automation liability was introduced as a new option in this year's survey and was immediately cited by 56% of respondents.
These are not abstract concerns. The same conditions creating growth opportunities could amplify losses if a major geopolitical event, systemic cyber incident or active catastrophe season arrives. Concern about sudden market reversals has nearly doubled since 2024, with 52% now naming market conditions as a barrier to addressing challenges, up from 28%. Data quality concerns rose in parallel, from 28% to 43%, pointing to unease about the risk quality of business being written during an expansionary phase.
"While market conditions are creating significant opportunities for growth, insurers remain aware of the risks that could quickly present themselves, said Garret Gaughan, global head of direct and facultative at Willis. "Our research shows that facultative reinsurance is increasingly being used as a strategic tool to help insurers expand their capacity, enter new markets and manage capital efficiently. At the same time, it provides valuable flexibility as organisations navigate uncertain times.”
The survey was conducted by Coleman Parkes Research between February and March.
