By Craig Gottwals – Attorney & RBP Expert – October 1, 2026
Higher claim severity, tighter underwriting, and strained carrier economics are driving 2027 renewals.
In 23 years of installing self-funded health plans, I cannot remember a medical stop-loss market quite as constipated as this one.
As we head into the fourth quarter of 2026, quotes are coming in later than I have ever seen. Turnaround times are painfully slow. Underwriters want more data, then newer data, then updated large claimant information. And when the quotes finally arrive, the numbers are frequently uglier than any of us want to see.
The Numbers Are Getting Worse
Mercer recently declared it pretty plainly: “The medical stop loss market has hardened.”
For January 2026 renewals, Mercer reported an average stop loss increase of approximately 23%, up from 18% during the previous renewal cycle. Even well-performing groups averaged increases of roughly 15%. Mercer also reports that underwriters have become more conservative and less aggressive on new business. Mercer: As the Stop Loss Market Hardens
And 2027 may be worse.
Lockton says employers should expect average 2027 stop loss renewal increases of up to 30 percent, compared with approximately 20% target increases for 2026. Carrier loss ratios have not stabilized, underwriting is tightening, and carriers increasingly want clean, current claims information closer to the effective date. Lockton: Stop Loss Volatility Adds to the Complexity
That last part certainly tracks with what I am seeing.
Lockton says 46% of January 1 policyholders were able to finalize coverage using August claims data in 2025. In 2026, that fell to only 32%. Underwriting decisions are simply moving later.
Why Is This Happening?
The short answer is catastrophic claims.
Tokio Marine HCC’s 2026 stop loss report found that claims exceeding $2 million have increased an astonishing 213% since 2020. Children under age ten now account for 39% of claims exceeding $1 million. Cancer alone represents more than 35% of total paid stop loss claims. Tokio Marine HCC 2026 Annual Market Report
This is not a one year phenomenon. Tokio Marine’s 2025 report found that claims over $2 million had increased an average of 26.7% per year since 2013. Tokio Marine HCC 2025 Stop Loss Findings
Sun Life is seeing the same thing. Its latest analysis covered more than 70,000 high-dollar claims from over 3,300 self-funded employers. Long hospitalizations, premature births, cancer, complex surgeries, specialty drugs and gene therapies are increasingly driving claims into the multimillion dollar range. Sun Life 2026 High Cost Claims Report
A year earlier, Sun Life reported that million dollar stop loss claims had increased 29% in a single year and 61% over four years. Sun Life 2025 High Cost Claims Analysis
HM Insurance Group’s 2026 drug report provides another clue. We now have individual gene therapies with estimated treatment costs exceeding $2 million and $3 million. HM Insurance Group: High Cost Medications and Therapies
This is what leveraged trend looks like in the real world. Medical costs might rise 8 or 9% overall, but claims penetrating a $100,000, $150,000 or $200,000 specific deductible can increase much faster.
Even the Reinsurers Are Feeling It
There is another layer most employers never see.
Stop loss carriers frequently purchase their own reinsurance. Gallagher Re reported this year that three major reinsurers have exited the U.S. medical reinsurance market. Gallagher does not characterize this as a capacity crisis, but it does expect greater pricing discipline, higher retentions and harder pricing in portions of the market. Gallagher Re: Rebalancing the U.S. Medical Reinsurance Market
Cigna has been even more explicit. The world’s largest stop loss underwriter has acknowledged implementing sizable price increases as it works through a multiyear effort to restore margins in its stop loss book. Cigna expects that process to continue through 2027. Becker’s: Cigna Stop Loss Margin Recovery
So no, your ugly stop loss renewal is probably not a coincidence.
Catastrophic claims are becoming more frequent. The claims themselves are getting larger. Specialty drugs are exploding. Carrier loss ratios have deteriorated. Reinsurers are becoming more disciplined. Underwriters want fresher information before taking the risk.
And all of it eventually lands in one place.
Your renewal.