“Lacklustre margins” are expected in 2026 for property and casualty (P&C) reinsurers, mainly driven by price cuts during this year’s January 1 renewals and a softening trend for upcoming mid-year cycles, according to a recent J.P. Morgan report.
Currently, there is increased capital in the market, fuelled by two years of robust returns at reinsurers, coupled with higher alternative capacity. This surplus is driving competition and downward pressure on pricing.
Additionally, while the LA wildfires in the first quarter of 2025 boosted reinsurance demand, the event did not materially change reinsurance pricing trends, but became a tailwind for demand.
This has made reinsurers to remain hesitant to bring down attachment points or reduce prices on lower layers of reinsurance towers, according to the P&C Insurance 2026 Outlook – Reinsurance report.
In 2025, global/European renewals (January 1 2025), Japan/Asia renewals (April 1 2025), and mid-year 2025 renewals (Florida, Gulf, Bermuda) saw roughly 5-15% price cuts.
“We estimate that reinsurance prices declined a further 15-20% with 1/1/26 renewals and, barring elevated cat losses, expect prices to remain soft through 4/1 and mid-year 2026 renewals. Reinsurers have generated robust returns in recent years, but we project ROEs in the business to compress closer to 10% in 2026 (higher for top-tier underwriters such as ACGL and RNR),” J.P. Morgan analysts stated.
Highlighting: “In our view, reinsurance prices are unlikely to turn positive unless the P&C sector faces insured losses of $100 billion or higher. On a positive note, declining reinsurance prices present a tailwind for primary carriers, most of which reduced their reinsurance coverage with the spike in prices in 2023.”
For the fourth quarter of 2025, J.P. Morgan expects benign catastrophe losses to boost results for re/insurance underwriters. Analysts predict the U.S. insurance industry will incur cat losses of roughly $5 billion in the period, down from $10 billion in Q3 2025 and $30 billion in Q4 2024.
The major drivers of U.S. catastrophe losses in this period were severe convective storms, winter storms, and floods across the Northeast, Mid-West, and Mid-Atlantic portions of the country.
“We believe that primary insurers will bear a considerable proportion of these losses given higher attachment points and retentions. Outside of the U.S., we expect losses from Hurricane Melissa, Typhoon Koto, Tropical Storm Senyar, Tropical Storm Ditwah, and storms across Europe and the Middle East,” said analysts.
Adding: “For companies that disclose intra-quarter data, both ALL (The Allstate Corporation) and PGR (The Progressive Corporation) reported catastrophe losses below our initial estimates for October and November. ALL reported pre-tax catastrophe losses of $83 million in October and $46 million in November. Consequently, we reduced our 4Q25 catastrophe loss projection for ALL (from $1.3 billion to $0.3 billion).”
As PGR reported $42 million of cat losses in October and $41 million in November. J.P. Morgan lowered its cat loss assumption for PGR from $386 million to $135 million.
Among the companies covered by J.P. Morgan, ALL and TRV (Travelers) are the most exposed to U.S. catastrophe risk on the primary side, while RNR (RenaissanceRe) and ACGL (Arch Capital Group) have the most exposure among reinsurers.
Meanwhile, AIG (American International Group) and CB (Chubb) are the most exposed to international catastrophe losses.
In recent years, primary insurers have absorbed a higher proportion of cat losses than historically, following changes in terms/conditions with 1/1/23 renewals – the reverse was for reinsurers.
However, analysts noted, this trend is now beginning to reverse, moving toward pre-2023 patterns.
