Tom Spier, chief commercial officer and Ben Rose, co-founder and president at Supercede believe there is a significant hole that will need to be fixed for the industry in the year ahead.

As reinsurers and insurers continue to face pressure on earnings, the focus heading into 2026 is shifting from rate to results. Capacity is still available, pricing is easing, and the cost of capital is coming down. Yet despite ongoing discussion around improving terms, one figure remains persistently high.

Each year, the global reinsurance market is estimated to forgo around $40 billion in unrecovered value following 1 January renewals.

This shortfall is not driven by adverse development or unforeseen claims activity. Instead, it reflects operational failures — both in the management of recoveries and in the way information is shared across internal teams. These issues have grown too large to ignore. In a softening market, where margins are under pressure and every basis point counts, leaving them unaddressed now represents a strategic risk.

A problem hiding in plain sight

The problem has two main causes. The first is claims leakage. Many cedents continue to lose legitimate reinsurance recoveries because the operational frameworks needed to track, notify and reconcile claims remain fragmented, or are missing altogether. Contracts may be executed, but the data supporting them is often not structured, stored or communicated in a way that enables enforcement. Important clauses go untracked. Notification deadlines are missed. Recovery rights are underutilised — or forgotten entirely.

In 2026, as catastrophe losses increasingly occur outside traditional peak regions and economic losses continue to outstrip insured ones, the cost of missed recoveries is more evident than ever. What was once dismissed as an administrative issue is now a direct drag on margin.

The second source of leakage is internal misalignment, particularly the gap between teams responsible for structuring reinsurance programmes and those charged with administering them. In many organisations, placement and operations still operate independently. When knowledge transfer is limited and data does not move smoothly between functions, the impact is felt through delays, premium misallocation and growing friction in reinsurer relationships.

The outcome is slower settlements, avoidable disputes and additional pressure on brokers, who are often pulled into reconciliation work long after deals are agreed.

Why 2026 changes the stakes

These challenges are not new, but their consequences are far more pronounced this year.

With pricing retreating from recent highs and underwriting income more difficult to generate, both cedents and reinsurers are placing greater emphasis on expense ratios. Margin protection is increasingly being sought through improved execution rather than higher rates. Scrutiny of operational performance is intensifying, particularly at board and CFO level. Questions that may have been deferred in earlier cycles are now unavoidable: Where are recoveries slipping through the cracks? Why are settlement timelines extending? Why do high-value treaties still rely on manual administration?

This shift is being driven by economic reality, but it is also reinforced by regulatory and reporting expectations — especially in London and Europe, where post-bind controls are under closer examination. While few advocate wholesale automation, there is growing agreement that the current level of leakage cannot continue.

Alignment, not reinvention, is the answer

The positive news is that this is not a technology challenge. The tools required to close the gap are already available. What is lacking is coordination.

Addressing the $40 billion issue requires a more intentional approach to linking placement and post-placement processes. It requires brokers, cedents and reinsurers to work from a shared understanding of what has been placed, what it covers and how it is intended to perform. Internally, it also demands earlier alignment between placement and operational teams, so downstream functions are not left trying to interpret programmes they had no hand in building.

Most importantly, it requires the market to stop accepting friction as an unavoidable by-product of complexity. In a softening market, with expense discipline rising up the agenda, this is the moment to reset expectations.

1 January is not the finish line

January 1 should not be seen as the end point. It marks the beginning of the most costly phase of the reinsurance lifecycle. As attention turns increasingly to margins, the industry can no longer afford to leave billions uncollected due to process breakdowns and misalignment.

The $40 billion leakage is not the inevitable cost of complexity. It is the cost of inaction.