KBRA, the US-based global credit ratings agency, says that more favourable reinsurance conditions are providing insurers with stronger protection ahead of the 2026 Atlantic hurricane season, despite warning that a quieter seasonal outlook does not remove the threat of significant catastrophe losses.
The ratings agency argues that greater reinsurance availability, lower renewal pricing and expanding alternative capital have strengthened insurers’ financial resilience, although underwriting discipline and programme structure remain critical.
While forecasts indicate below-average Atlantic hurricane activity in 2026, KBRA stresses that seasonal projections cannot predict landfall, meaning a single hurricane affecting a heavily insured coastal region could still result in substantial insured losses.
As a result, the agency says catastrophe preparedness continues to depend more on capital strength and reinsurance protection than on expectations of lower storm frequency. KBRA identifies the continued softening of the reinsurance market as one of the most significant developments entering the season.
January, April, and mid-year 2026 renewal reports from brokers have highlighted that abundant capacity from both traditional reinsurers and insurance-linked securities (ILS) investors has driven more favourable renewal outcomes for cedents, with KBRA-rated insurers reporting property catastrophe reinsurance price reductions of between 10% and 25% at the June 2026 renewals.
Those reductions came despite global insured natural catastrophe losses exceeding USD $100 billion during 2025, highlighting the depth of available capital across the market.
KBRA notes that although pricing has eased for a second consecutive year, reinsurance rates remain comfortably above pre-hard market levels seen before 2017. The ratings agency attributes the increase in market capacity to continued growth in alternative capital, including record catastrophe bond and ILS issuance, alongside expanding traditional reinsurance capital as premium earnings from previous renewal years continue to flow through.
The agency also highlights a notable shift in the structure of catastrophe programmes. During the hard market, insurers frequently retained more working-layer exposure or relied on captive arrangements as lower layers became difficult and expensive to secure. KBRA says reinsurers are now competing more actively for these lower layers, while capacity at higher attachment points remains plentiful, resulting in more competitive programme pricing across the market.
However, KBRA cautions that cheaper reinsurance should not automatically be viewed as a credit positive. The agency says the benefits of lower reinsurance costs will only be realised where cedents maintain adequate pricing, preserve appropriate retention levels and continue to manage counterparty, reinstatement and exhaustion risks throughout their programmes.
Beyond pricing, KBRA says insurers now have access to a broader range of risk transfer solutions than during the hard market. The agency points to the return of aggregate and multi-event covers alongside a robust catastrophe bond market, giving cedents greater flexibility when constructing reinsurance programmes.
According to KBRA, combining traditional reinsurance with catastrophe bonds, aggregate protection and, where appropriate, well-capitalised captives can strengthen overall programme resilience by diversifying both capacity providers and claims-paying resources.
KBRA believes stronger reinsurance protection has complemented improved capital positions across the US property and casualty insurance sector. The agency says most rated insurers enter the hurricane season with record surplus levels and stronger reserves, making it more likely that a major catastrophe would affect earnings rather than capital. Smaller regional insurers and specialist coastal carriers, however, remain more vulnerable to catastrophe volatility despite the more favourable reinsurance environment.
The ratings agency also warns that increased competition following a profitable 2025 could offset some of the advantages created by lower reinsurance costs. KBRA says insurers expanding underwriting or reducing premium rates too aggressively risk weakening underwriting margins, particularly if pricing declines exceed the savings achieved through cheaper reinsurance. An active hurricane season or a major landfall could quickly reverse recent profitability, especially for catastrophe-exposed regional carriers.
Looking ahead, KBRA says its Insurance Financial Strength Ratings continue to place significant emphasis on the quality and effectiveness of insurers’ reinsurance arrangements. The agency assesses catastrophe exposure through stress testing of capital adequacy, reinsurance protection, operating performance, liquidity and enterprise risk management rather than relying on seasonal hurricane forecasts.
KBRA adds that while isolated rating downgrades remain possible where insurers demonstrate inadequate pricing, reserving or reinsurance protection, most rated carriers should be able to absorb catastrophe losses without materially affecting claims-paying ability unless the 2026 hurricane season proves significantly more severe than anticipated.
