J.P. Morgan Sees Reinsurance Pricing Pressure Extending into 2027

Reinsurance pricing is unlikely to begin stabilizing before 2027 as strong profitability and relatively light catastrophe losses continue to support industry capacity, Reinsurance News reported August 3, citing J.P. Morgan's latest research on the European reinsurance sector.

According to Reinsurance News, J.P. Morgan's analysis found little indication that current pricing conditions are approaching a turning point. The investment bank reportedly expects reinsurers to continue producing solid financial results through 2026, even as softer pricing affects revenue growth.

Reinsurance News reported that J.P. Morgan believes property catastrophe reinsurance pricing has already softened considerably. However, the firm reportedly views actual catastrophe loss experience, rather than underlying profitability alone, as the primary factor likely to influence the direction of the market.

According to Reinsurance News, J.P. Morgan said that with catastrophe losses remaining below expectations during the first half of 2026, pricing has limited potential to recover in the near term. The research reportedly concluded there is little likelihood that reinsurance prices will begin stabilizing before 2027.

Reinsurance News also reported that J.P. Morgan pointed to previous market turns following years of elevated catastrophe losses. The research cited 2011, 2017, and 2022 as examples of years in which higher-than-expected catastrophe claims were followed by firmer conditions during subsequent reinsurance renewals.

According to Reinsurance News, J.P. Morgan estimated that lighter-than-expected natural catastrophe losses during the first half of 2026 increased pre-tax earnings among major European reinsurers by approximately 12 percent on average. The favorable loss experience could either strengthen reported earnings or allow reinsurers to add to reserve buffers.

Reinsurance News reported that J.P. Morgan expects the sector to remain highly profitable in 2026 unless catastrophe activity changes substantially during the second half of the year. The firm reportedly said it would take a significant reversal in catastrophe experience for reinsurers to miss their profit targets and for enough capital to leave the market to meaningfully alter pricing conditions.

According to Reinsurance News, J.P. Morgan also said reinsurers may need to determine whether excess earnings should be retained as additional balance sheet protection or returned to shareholders. The research reportedly does not anticipate major capital management announcements while the Atlantic hurricane season remains underway.

Reinsurance News further reported that J.P. Morgan downgraded Swiss Re from Neutral to Underweight based on valuation and expectations that earnings growth will moderate as softer pricing affects results. Hannover Re was also reportedly placed on Negative Catalyst Watch ahead of its second-quarter earnings.

According to Reinsurance News, J.P. Morgan continues to favor Munich Re among the major European reinsurers over the longer term despite expectations that reinsurance pricing will remain under pressure through at least 2027.