J.P. Morgan, the global investment bank and financial services firm, believes the reinsurance market is likely to remain under pricing pressure into 2027, despite another year of strong underwriting profitability driven by relatively light natural catastrophe losses.
In a new research report on the European reinsurance sector, J.P. Morgan said the current market backdrop leaves little indication that pricing conditions are close to improving.
The firm’s analysts expect reinsurers to continue reporting solid financial results through 2026, while weaker pricing and lower revenues remain a feature of the market.
According to J.P. Morgan, property catastrophe pricing has softened significantly and, while profitability remains strong, actual catastrophe loss experience continues to be the key factor influencing the reinsurance cycle.
With catastrophe losses remaining below expectations so far this year, the investment bank believes there is limited scope for pricing to recover in the near term. Analysts noted, “there is little potential for reinsurance prices to begin to show signs of stabilisation into 2027.”
The investment bank noted that previous reinsurance market turning points have generally followed years of elevated catastrophe losses, rather than changes in underlying profitability. It pointed to historical examples including 2011, 2017 and 2022, when above-expected catastrophe claims were followed by firmer pricing in subsequent renewal periods.
J.P. Morgan estimates that lighter-than-expected natural catastrophe losses during the first half of 2026 have increased pre-tax earnings across the major European reinsurers by around 12% on average. The firm believes this favourable loss experience is either supporting stronger reported earnings or allowing companies to strengthen reserve buffers.
As a result, J.P. Morgan expects the sector to remain highly profitable this year unless catastrophe activity changes significantly during the remainder of 2026.
The analysts said, “It would take a monumental reversal in catastrophe experience in H2 for the reinsurers not to achieve their 2026 profit targets, let alone cause enough capital destruction to turn the reinsurance market.”
J.P. Morgan added that continued profitability, combined with a softer pricing environment, means reinsurers may increasingly face decisions over whether to retain excess earnings in reserve buffers or return more capital to shareholders.
The investment bank suggested reinsurers may eventually need to demonstrate how excess earnings will benefit shareholders, either through stronger balance sheet protection or enhanced capital returns, although it does not expect major announcements while the Atlantic hurricane season is still underway.
Within its European reinsurance coverage, J.P. Morgan downgraded Swiss Re to Underweight from Neutral, citing valuation and expectations that earnings growth will level off as softer market conditions increasingly affect results. The investment bank also placed Hannover Re on Negative Catalyst Watch ahead of its second-quarter earnings, reflecting expectations that revenue trends will remain under pressure.
Despite the weaker pricing outlook, J.P. Morgan continues to favour Munich Re, which it sees as the strongest positioned among the major European reinsurers over the longer term.
