Property catastrophe reinsurance pricing is trending down mid-teens for the mid-year 2026 renewals, meeting or beating market expectations, according to BMO Capital Markets, who also expect prices to stay under pressure absent a significant $100 billion or more of reinsurance losses.
Unlike previous soft market cycles, analysts at BMO note that average loss-retention levels for buyers, the point at which reinsurance claims kick-in, remain high.
Reinsurers raised attachment points significantly in 2023 at the onset of the hard market cycle, in response to rising losses from secondary perils such as severe convective storms and wildfires. While pricing has fallen, reinsurers have remained disciplined and reports suggest that attachment points are holding.
According to BMO, because reinsurers are staying further away from primary risk attachment points, their risk adjusted return on equity (RoE) is still forecasted to hit the high teens, on a modelled basis; consequently, the market has not yet reached single-digit RoEs of a soft market.
Analysts observe that pricing pressure is stronger at the top of reinsurance towers, while lower layers closer to the actual risk are experiencing milder declines.
“We are modestly surprised to the upside by this, as we expected Florida’s tangible tort reform to make its way into the pricing equation, but it seems it hasn’t in a material way yet. While no one has been willing to quantify the benefit yet, carriers that compare claims volumes, following Hurricanes Helene & Milton in 2024 relative to 2022’s Hurricane Ian, see a clear benefit,” analysts added.
BMO further highlighted: “Terms & conditions remained resilient at 6/1 renewals. Pricing remains the focus and pressure point of 6/1 renewals. Retention levels among cedants remained steady, a positive sign for re-insurers. Aggregate covers are increasingly working their way into the conversation around renewal, but supply was characterised as flattish.”
Looking ahead to early 2027, BMO expects pricing to continue to face downward pressure, provided that catastrophe-related reinsurance losses do not significantly exceed forecasts (>$100B).
Such an outcome is considered highly unlikely, with less than a 20% chance, according to analysts.
BMO concluded: “Our base case pricing expectation would be for a continued decel, albeit less downwards sloping (high singles to low double-digits vs. mid-teens). We think terms & conditions could begin to crack in 2027 following two years of heavily scrutinized price-focused renewals. This could be by way of more aggregate treaties, retentions moving lower, or broader coverage offerings.”
