Captive Insurance Cessions Drop Amid Health Reinsurance Growth

US health insurers have sharply increased their use of reinsurance over the past decade as medical cost volatility, government-sponsored business, and capital-management needs reshape the market, according to a new AM Best report.

Health insurance premiums ceded to the reinsurance market reached $203 billion in 2025, up from $59 billion in 2016, representing growth of more than 300 percent, according to Best's Market Segment Report, "Reinsurance Solutions Becoming More Viable for Health Insurers."

Growth has accelerated in recent years. Annual ceded premium growth reached double digits in 3 of the past 5 years, including increases of 30 percent or more in both 2024 and 2025.

"Underwriting margins across several US health insurance segments have been under pressure, prompting insurers to seek additional reinsurance support to manage large claims exposure and improve capital efficiency while looking to reduce earnings volatility," Jennifer Asamoah, senior financial analyst at AM Best, said.

Demand for stop-loss reinsurance also increased as insurers faced greater exposure to catastrophic claims. Stop-loss and excess-loss ceded premiums rose 50 percent year over year to $19.6 billion in 2025.

AM Best expects healthcare costs to continue increasing, with new high-cost specialty medications among the factors contributing to the trend. Higher labor and supply costs, an aging population, and changes to Medicare Advantage and Medicaid managed care are also expected to increase pressure on healthcare providers.

"Even if rising utilization and medical cost trends were to stabilize, the use of reinsurance would most likely continue as a part of insurers' capital management strategy, helping to support future premium growth," Jaime Quito, financial analyst at AM Best, said.

Affiliated reinsurance agreements continued to account for a substantial portion of the US health reinsurance market in 2025, although unaffiliated companies received 47 percent of ceded premiums, the highest share in the past decade. Year-over-year growth in premiums ceded to unaffiliated companies was more than twice the growth in affiliated premiums.

Comprehensive major medical represented the largest line of total ceded health premiums in 2025 at $38 billion, followed closely by Medicare Advantage.

The use of captive insurance moved in the opposite direction. After years of increasing captive use across the health insurance industry, premiums ceded to captives fell 56 percent to $5 billion in 2025 from $11 billion in 2024.

In the Asia-Pacific market, AM Best said consumer demand, protection gaps, and regulatory changes are driving health reinsurance solutions.

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