Reinsurance Pricing Softens as Capital Grows and Losses Decline

Expanded capital and reduced catastrophe losses drove softening across reinsurance lines at the January 1, 2026, renewals, according to the January 1, 2026 Reinsurance Renewal Report issued by Guy Carpenter. The report attributes a 17.6 percent reinsurer return on equity in 2025 to a combination of strong retained earnings, favorable underwriting results, and a shift in reinsurer exposure to catastrophe events, which declined from 20 percent before 2023 to 11 percent in 2025.

Dedicated reinsurance capital grew by an estimated 9 percent in 2025, supported by underwriting profits, recovering asset values, and increased investor interest in both traditional and alternative capital sources, including catastrophe bonds. Insured catastrophe losses fell to $121 billion—18 percent below the 5-year inflation-adjusted average—largely due to a benign US wind season and a shift in loss composition toward severe convective storms and California wildfires.

For property catastrophe reinsurance, cedents achieved double-digit risk-adjusted rate reductions on non-loss-impacted programs, with demand rising 5 to 10 percent. Approximately half of the new demand was for traditional capacity, while the other half sought aggregate and quota share solutions, or alternatives such as catastrophe bonds and parametric products.

Investor appetite for insurance-linked securities remained strong, with 2025 marking a record year for catastrophe bond issuance. The total notional outstanding for property and cyber-catastrophe bonds exceeded $58 billion. Notably, 15 sponsors accessed the catastrophe bond market for the first time in 2025.

Casualty renewals produced mixed outcomes depending on region, structure, and historical results. Programs with disciplined limit management and favorable experience generally renewed at or near expiring terms, with improvements for some clients using proportional structures. US excess of loss programs with lower attachments experienced rate increases of around 10 percent due to litigation trends and loss severity, while higher-attaching treaties saw reduced pressure on rates.

Sidecars continued to expand in both property and casualty lines, with increased investor interest from private equity firms, alternative asset managers, and pension funds. Structures commonly included sliding-scale commissions and sponsor co-investment to align interests. Managing general agents and capital-light entities increasingly used sidecars for capacity and capital access.

The cyber-reinsurance market shifted away from quota share and aggregate arrangements toward more event-specific and hybrid treaty designs. New structures introduced at January 1 included risk excess of loss, retrocession arrangements, and combined property/cyber excess of loss treaties. Risk excess coverage gained broader adoption, while ceding commissions were flat to slightly increased.

"Despite global trade tensions and increased regulatory scrutiny, reinsurers have grown capital due largely to strong retained earnings. This has allowed clients to benefit from lower prices and a wider range of innovative solutions to meet their rapidly evolving needs," said Dean Klisura, president and CEO of Guy Carpenter.