What if a catastrophe season triggers a reinsurance retrocession spiral?
A clustered cat season collapsing the retrocession market leaves primary reinsurers unable to cede risk, spiking coverage costs and pressuring reinsurer equities — but the macro/credit spillover is modest. Rhymes with 2005 (Katrina-Rita-Wilma) and 2017 (Harvey-Irma-Maria), which hardened the reinsurance market and lifted rates for years rather than triggering systemic stress. Trade the reinsurance complex and ILS — the broad HY/crypto cascade overstates a sector-contained capacity squeeze.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. A clustered catastrophe season collapses the retrocession market, leaving primary reinsurers unable to lay off risk and spiking global coverage costs. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.