Protection for reinsurers funded by investor capital and secured by full collateral.
Collateralized retrocession is the cover a reinsurer buys for its own portfolio from vehicles funded by investors, whose obligation is fully secured by deposited assets. It has largely displaced traditional retrocession on high layers, where risk concentration made the chain of carriers dangerous. The problem it solves is precisely the retrocession spiral: when reinsurers retrocede to one another, one loss returns several times through the system in different guises, and nobody knows their real exposure. A carrier depositing its entire obligation breaks the chain, since it has nothing to retrocede itself. The market is narrow and heavily concentrated in a few funds, which makes it the most sensitive link in the whole structure: when that capital withdraws after a costly season, retrocession capacity tightens first, and the price increase then transmits to every direct cover.
After a season with two major events, collateralized retrocession capacity available at the January 2026 renewal falls by roughly 25 percent, part of the collateral remaining trapped on prior years. Retrocession prices rise 35 to 50 percent, and reinsurers, forced to retain more net, pass that increase into their own layers at the April and July renewals.
Collateralized retrocession, Retro collatéralisée, Collateralized retro, Rétro ILS