The competitive environment will undoubtedly erode some of the insulation reinsurers enjoyed during the hard market, according to USI Insurance Services’ 2026 Commercial Property & Casualty Market Outlook Report.
As the market shifts, the current rates, attachment points, and terms that reinsurers have fought to maintain are facing significant challenges from a marketplace with abundant capacity, USI stated.
For the past several years, reinsurers benefited from a hard market where high attachment points on treaties pushed a majority of catastrophe losses onto primary insurers.
The first half of 2025 saw unusually high natural catastrophe losses, surpassing an estimated $80 billion globally. Later in the year, the property insurance industry experienced a quiet hurricane season, which limited total global cat losses to approximately $107 billion, far below earlier $150 billion+ projections.
This stability drove rate improvements in the second half of the year, with shared placements and excess cat policies seeing decreases of up to 35%, explains the report.
Now, the USI report indicates a change. This new competitive environment is reportedly again exposing reinsurers to those cat losses that have largely been absorbed by insurers, being those from secondary perils such as severe convective storms, wildfires, and floods.
While higher combined ratios are expected to lower profitability for reinsurers, the industry remains resilient, with reinsurers having strong balance sheets and available surplus to weather the softening rates or any potential increased loss activity.
A key driver of this shifting dynamic is the influx of capital in the reinsurance sector. According to the report, by the end of 2025, both traditional and alternative capital reached record highs.
“Both traditional capital and alternative capital (e.g., insurance-linked securities, sidecars, catastrophe bonds) achieved record levels of funding in 2025, with alternative capital accounting for an estimated $121B, or approximately 19%, of all dedicated reinsurance capital,” analysis stated.
Adding: “The returns provided by the sector are still attractive, with property rates remaining adequate and a quiet hurricane season fuelling favourable loss ratios. Therefore, the flow of capital is expected to continue until rate adequacy becomes challenged, large-scale CAT events contribute to elevated combined ratios, or macroeconomic pressures restrict the amount of available capital in the market.”
Given the stability and state of the reinsurance market, treaty renewals are expected to be widely favourable for insurers. This has also paved the way for a softer pricing environment in the first half of 2026.
According to USI, for non-cat property with minimal loss history and favourable risk profile, rates at H2 2025 were -10% to flat, and are predicted to remain the same for H1 2026.
In H2 2025, rates for cat property with minimal loss history and favourable risk profile were -30% to -10%, and are predicted to go down to -20% to -5% for H1 2026.
For cat or non-cat property with unfavourable loss history or risk profile, rates at H2 2025 stood at -15% to 5% and are expected to remain the same for H1 2026.
Analysts concluded that following a low-loss 2025 and favourable treaty renewals, property market competition will remain strong through H1 2026, with rate decreases expanding among single-carrier insurers. The shared and layered space will continue to soften for high-quality risks.
This environment allows insureds to secure higher limits, broader terms, and improved deductibles. Furthermore, increased capacity enables buyers to consolidate multiple locations into master policies or use parametric coverage to reduce retentions.
