In announcing new targets and a refreshed strategy today, Swiss Re, one of the world’s largest reinsurance companies, has highlighted the role of third-party capital investors in helping to fuel its expansion into natural catastrophe risks over recent years, while also maintaining balanced exposure.Swiss Re explicitly said today, that the growth of its nat cat exposure has been supported by third-party investors, through its insurance-linked securities (ILS) and reinsurance sidecar platform.The reinsurance firm also highlighted its Alternative Capital Partners (ACP) arm, where the ILS investment management and structuring of catastrophe bonds and other ILS opportunities takes place, as a core piece of its business.The company said its refreshed “Built to lead” strategy is designed to “advance the core of Swiss Re’s business through disciplined execution, differentiated propositions and a leading position in its most important markets.” Natural catastrophe reinsurance underwriting is a core global focus for Swiss Re, with the company one of the biggest players.

The use of third-party capital from investors has served the reinsurer well, helping it to expand its nat cat portfolio while moderating loss exposure at the same time, partnering with investors to support and fuel continued growth.Swiss Re said it uses third-party capital investor relationships to help it optimise its nat cat exposure, with external assets under management that is relevant for hedging now standing at US $3.3 billion.This external AUM, that supports the Swiss Re nat cat business, refers to the assets within its reinsurance sidecars, such as Sector Re, as well as the Core Nat Cat Fund which is a quota share ILS fund strategy that allows investors to partner with Swiss Re on its global book of catastrophe risks, but exclude the cat bond assets the company manages.

Alongside other retrocession, this use of third-party capital has served the reinsurer well, in helping it report a 10-year average nat cat combined ratio of 68%, which includes prior year reserve development.It’s no surprise that companies like Swiss Re continue to see nat cat reinsurance as an attractive area to underwrite in and to grow, given the low combined ration that has been achieved over time.Swiss Re said that it expects to make use of less external retrocession in 2026, given its optimised gross vs net nat cat exposure.

In announcing its new strategy this morning, Swiss Re said that it will target group net income of US $4.5 billion for 2026.That figure has not been particularly well-received by equity analysts this morning, who had largely anticipated higher.The company also announced an intention to provide a sustainable share buyback programme starting in 2026 at US $500 million, which again fell short of analyst expectations.

At the firm’s management dialogue today, we expect analysts will be keen to dive into why those figures fell short.It will be interesting to see what Swiss Re has to say about the cycle and the state of reinsurance pricing, given the market is clearly softening right now, particularly in property catastrophe risks.But that is also somewhere that the use of third-party capital can come into its own for reinsurers, in helping them better manage their way through softer points of the market cycle.

Of course, it will be down to large reinsurance firms, such as Swiss Re, to lead on discipline in the market and help to maintain the levels of returns and important contract features such as attachments, to maintain the margin viability of nat cat to ensure third-party capital partners remain compensated for the support they are increasingly providing.Commenting on the new strategy and outlook this morning, Swiss Re’s Group Chief Executive Officer Andreas Berger said, “We continue to strengthen the foundations of our business.This year in particular, we accelerated efforts to improve the resilience of our in-force book in L&H Re.

Along with the other actions we have taken, this gives us the confidence to increase our target for that Business Unit in 2026, contributing to an updated Group net income target of USD 4.5 billion.“Today we are a stronger Swiss Re — delivering resilient earnings and leveraging a powerful data and AI platform to drive smarter decisions, deeper risk insights and long-term value for our clients.As we look ahead, we continue to focus our efforts and resources firmly on our core markets.

Conditions remain constructive, supported by structural growth.This puts us in a strong position for 2026 and beyond.” In P&C Reinsurance, Swiss Re continues to maintain its combined ratio target of less than 85%.Maintaining discipline during a softening property cat market is likely to be key to that goal, so large reinsurers should be motivated to stay much more disciplined than we saw back in the mid-2010 softening period.

Finally, Swiss Re also revealed a lot of information about its work in artificial intelligence today, including about its AI platform that is powered by Palantir, one of the highest-profile AI software companies in the world.That will not be a small investment, financially, but innovating around AI is expected to improve and further optimise the underwriting and management of portfolios of natural catastrophe risks over-time, which may just give an additional edge to those early adopters through a softening market..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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