Evercore ISI, the investment research arm of Evercore, has outlined a challenging backdrop for the property and casualty (P&C) insurance sector in its first-quarter 2026 preview, pointing to increasing cyclical pressure across commercial, personal, and reinsurance markets.
Evercore ISI emphasises that a combination of softening pricing conditions and ongoing technological disruption is weighing on sector valuations, with concerns around artificial intelligence (AI) reducing the perceived role of brokers and advancements in autonomous driving technologies affecting major personal auto insurers.
According to Evercore ISI, these dynamics have limited the traditional defensive appeal of auto and broker stocks during recent macroeconomic volatility, even as commercial lines and reinsurers have outperformed broader financials and the S&P 500 so far this year.
Evercore ISI expects commercial lines results to reflect a clear continuation of the softening cycle. The firm indicates that weaker pricing in large accounts is beginning to filter through to smaller and mid-sized segments, with Hartford and Travelers likely to see more pronounced effects.
The report forecasts that several insurers, including Hartford, Travelers, White Mountains and American International Group, may report weaker-than-expected top-line figures in the first quarter, with White Mountains particularly impacted due to its disciplined stance on underwriting volumes in order to preserve pricing. Looking ahead, Evercore ISI identifies the second quarter as a more significant test for property pricing, as year-on-year comparisons become more challenging.
While casualty pricing is expected by Evercore ISI to provide some support against softness in property and other short-tail lines, the firm cautions that sustained strong returns across the industry could encourage increased competition. Evercore ISI also notes that broader inflationary pressures, including social inflation, may prevent the cycle from deteriorating as sharply as in previous periods, potentially shortening the duration of the downturn while still allowing for acceptable returns.
In personal lines, Evercore ISI anticipates a divergence between volume and premium growth. The firm expects policy counts to remain robust at leading players such as Progressive and Allstate, but believes that overall premium growth across the segment is likely to underwhelm. Evercore ISI attributes part of this to favourable seasonal conditions in early 2026, which it believes may have delayed margin normalisation.
Despite relatively attractive valuations, Evercore ISI maintains a cautious stance, suggesting that margin pressures could emerge more quickly over the remainder of the year. The firm further observes that scale advantages built by the largest insurers, including Progressive, Allstate, State Farm and GEICO, are likely to reinforce market concentration, potentially limiting growth opportunities for smaller competitors.
Evercore ISI indicates that broker performance should remain broadly stable, with organic growth largely in line with expectations. The firm points to its own survey data suggesting stronger nominal GDP growth in the first quarter, which it believes may help offset ongoing moderation in pricing. Evercore ISI also highlights completed mergers and acquisitions as a meaningful contributor to growth for firms such as Aon and Marsh, with a significant uplift expected in reported figures.
A central theme identified by Evercore ISI is the need for brokers to address investor concerns around artificial intelligence. The firm stresses that brokers will need to clearly quantify their exposure to segments viewed as more vulnerable to automation, particularly personal lines and smaller commercial accounts, while demonstrating the value they provide through risk management, data insights, and claims support.
Evercore ISI cites Arthur J. Gallagher as a positive example, noting that the company has estimated its exposure at just 3% of brokerage revenues, below Evercore ISI’s own prior assumptions, with even lower exposure levels estimated for Marsh, Aon and Willis Towers Watson.
In reinsurance, Evercore ISI expects pricing trends to remain under pressure, with April renewals declining by approximately 15 to 20 per cent and further weakness possible later in the year, particularly in catastrophe-exposed regions such as Florida. Despite this, Evercore ISI observes that current valuation levels are broadly comparable to those seen in the previous soft market, even though returns remain higher.
The firm highlights that key catastrophe pricing indices continue to sit above levels recorded between 2013 and 2017, and suggests that even with further rate reductions, pricing in the US market could remain structurally elevated relative to that period. Evercore ISI also anticipates that capital management activity, including share buybacks, will remain consistent with recent trends despite softer top-line performance.
Finally, Evercore ISI expects catastrophe losses for the first quarter to fall within typical seasonal ranges. The firm estimates that geopolitical developments, including the conflict involving Iran, are likely to result in relatively contained insured losses in the range of $30 million to $50 million, which Evercore ISI considers manageable for the sector.
