Analysts at Jefferies have suggested a major loss event exceeding $100 billion would likely be required to materially alter reinsurance market conditions, following a 15–20% decline in property catastrophe pricing at the June renewals.
According to a new report from the firm, early forecasts point to a below-average hurricane season this year, amidst a shift to El Niño conditions that reduce storm activity and result in lower landfall odds.
Jefferies continued, “Conditions are pointing to below normal activity for the North Atlantic storm season – Sea surface temperatures in the western Atlantic are near average, but cooler than normal in eastern/central tropical Atlantic, where storms typically form.
“Weak La Niña conditions currently exist, though this is expected to transition to El Niño (moderate/strong levels) shortly. El Niño is generally less conducive to storm formation/activity.”
This combination has reportedly led meteorologists at Colorado State University to expect a below-average hurricane season, including a 24% likelihood of a major hurricane making US landfall (20th century average of 43%) and a 26% likelihood of a major hurricane tracking into the Caribbean (20th century average of 47%).
Jefferies noted that these 2026 forecasts are roughly in line with the average forecast over 2012-16.
“We note that since 2014, CSU meteorologists have a ~45% correlation, or accuracy, when comparing estimated activity from initial forecasts and actual observed activity for the Atlantic hurricane formations (since ’20 the accuracy jumps to ~55%). CSU’s June forecast was reduced from April’s,” the firm’s report added.
Jefferies observed that the 2026 hurricane season comes several years after the $50 billion+ industry loss Hurricane Ian, which drove the hard reinsurance market in 2023, followed by a moderation in the subsequent three years.
As per the report, large hurricane losses this year could lead to some re-firming of prices, but Jefferies does not anticipate a widespread hardening of the market, citing carriers’ strong retained earnings growth in recent years, a renewed growth orientation among ILS funds, and Florida market reforms that are driving fresh interest in the state.
With this in mind, the firm underlined a ~$100 billion+ event, particularly one centred in Florida, as the threshold needed to fundamentally shift the reinsurance and CAT bond markets.
Jefferies continued, “If sizeable losses do materialise and drive pricing higher, brokers could see some levelling out of organic in the outer years as rate-driven exposure increases flow through. A benign season with little to no losses would likely favour a primary insurer trade over reinsurers, who have outperformed YTD.
“If hurricane activity and insured losses are light through the season, Bermuda reinsurers are likely to exit the year with continued excess capital, setting up a potential for further acceleration in buybacks starting in Q4’26.”
