Bermuda-based reinsurance company, RenaissanceRe (RenRe), expects the supply demand dynamics in property catastrophe that played out at the January 1st renewals to persist into the mid-year renewals, but believes that the robustness of rate adequacy will produce a similar outcome to what the firm achieved at 1.1 2026, according to Kevin J. O’Donnell, President and Chief Executive Officer (CEO).
Speaking yesterday during RenRe’s Q4 and full year 2025 earnings call, O’Donnell and David Marra, Executive Vice President and Group Chief Underwriting Officer (CUO), discussed the firm’s 1.1 2026 renewal experience in light of softening property cat rates.
“Property cat rates for us were down low teen percentages. We found some opportunities to grow, which should keep top line premium and property cat down only mid-single digits, excluding the impact of reinstatement premiums,” said O’Donnell.
Later in the call, the CEO confirmed that a property cat premium reduction of mid-single digits is the expectation for all of 2026, as RenRe expects the supply demand dynamics seen at 1.1 to continue in the months ahead.
“So, we anticipate that there’ll be continued rate reductions going into the mid-year renewals. That said… I think there’s a lot of focus on rate change, if we look at rate adequacy, it’s a bit of a different story. There’s very strong rate adequacy in the mid-year renewals. A lot of those are US focused, and many were affected by the wildfires. So, we go into that renewal at the same risk-adjusted reduction. So, if top-line reductions are a little bit more, the robustness of the rate adequacy should serve to produce results similar to what we got at 1.1,” he said.
Expanding on this, Marra offered some more insights into the firm’s outlook for property cat reinsurance rates throughout 2026.
“First of all, we said we did see pressure, but we were starting from a very good spot, so rate adequacy is still strong. I can break that down a little bit more for you. The low teens that we saw in the overall cat book, that is a bit separate, the US cat book that renews in at 1.1, it’s about a third of the US cat, that was down about 10%, whereas the international and global portfolio was down about 15%. So, part of what we’re faced with, not all risks are the same. Both of those risks are attractive in their own ways,” said Marra.
“But rating level is still high. We also see really strong terms and conditions consistent with the last three years. So, it’s not as much about how we will react to rate decreases. We have a strong level of adequacy, access to all the business, and a lot of options to construct a portfolio. We do see growing demand on the US side, there were signs at 1.1, and we expect more in Q2, so that will present opportunities, but our approach is to select the best opportunities, make sure we get the best signings, and construct an attractive portfolio,” he added.
During his opening remarks, Marra delved deeper into RenRe’s renewal strategy and aims in the property cat market.
“Our goal in property catastrophe was to maintain our existing portfolio and deploy additional capacity into attractive opportunities. Reinsurance supply was up following several years of strong results. This additional supply resulted in increased rate of pressure globally, with rates down on average in the low teens. For our portfolio, retentions and terms and conditions remain consistent with recent strong levels, we successfully renewed our existing lot and deployed new limits selectively across our owned and managed balance sheet.
“Overall, we expect to see a reduction in gross premiums written in Q1 due to rate decreases, which will be partially offset by growth from new demand model. Margin of the property catastrophe book remains well above the cost of capital,” he said.
The CUO went on to highlight numerous mitigating factors to the effect of rate decreases on the reinsurer’s net retained business.
“First, we shape our portfolio with ceded reinsurance, which improves our net result. Ceded rates were down high teens across our portfolio. In addition, we renewed a series of our Mona Lisa cat bonds at a larger size, with spread tightening by more than 50% on a risk-adjusted basis. And finally, we share a significant part of our portfolio with capital partner vehicles which produces fee income, which is less sensitive to rate movement.
“This strategy has resulted in an average underwriting margin of over 50% over the last three years, and we remain confident in our ability to continue producing strong returns in our property cat book,” said Marra.
