KBW, the investment bank and financial services research firm specialising in the insurance sector, has indicated a more challenging mid-year catastrophe reinsurance renewal environment for sellers, with pricing reductions nearer 20% than 15%, particularly for Florida-focused business, while terms and conditions (T&Cs) are seen as largely holding firm.
This conclusion was achieved following the semi-annual Bermuda Tour, where KBW analysts met with reinsurance executives to discuss market conditions and outlook.
While property and property cat reinsurance rates continue to soften, KBW noted that the more significant development across the market is that the stricter terms and conditions introduced during the 2023 hardening cycle have largely remained intact, despite a series of smaller concessions beginning to emerge.
According to KBW, reinsurers are showing far greater willingness to accept lower pricing than to reverse the structural changes secured at the 1 January 2023 renewals, highlighting discipline in the market.
However, the firm said incremental adjustments to T&Cs are increasingly becoming part of negotiations and, collectively, are beginning to influence the market environment.
Among the adjustments highlighted by KBW were changes to minimum premium true-up provisions, which now permit premium adjustments to move in both directions depending on changes in exposure levels. Under the revised approach, if an insurer’s exposure at year-end is lower than had been assumed at the time of the 6/1 renewal, the cost of its reinsurance programme can now be reduced accordingly.
KBW noted that previously, contracts only allowed premiums to increase when exposure rose, rather than decrease when exposure fell. The firm added that minimum and maximum parameters typically remain set around 80% and 120%.
The company also noted that Florida reinsurance premiums are increasingly being paid in quarterly instalments rather than entirely upfront, a move the firm said introduces additional counterparty risk. Elsewhere, retrocession coverage has broadened from “named hurricanes and earthquakes” to “named natural perils” while aggregates, cascading covers and top-and-drop structures are becoming more widely available.
KBW noted that these structures were never truly absent from the market, but had previously been priced at levels that effectively suppressed demand from cedents. KBW also said they are still generally not regarded as providing pure earnings protection for insurers. In addition, the research firm highlighted only modest changes to hours clauses and radius definitions, while observing that there has been very limited movement in relation to coverage for strikes, riots and civil commotion (SRCC) and terrorism.
On pricing, KBW estimated that headline risk-adjusted reductions for mid-year property catastrophe renewals are averaging around 20%. The firm said it heard ranges including “15-20%, 17.5-20%, and 20% or more”, with market participants often indicating that outcomes were trending towards the upper end of those ranges. KBW said the direction of travel was consistent with developments seen during the 1 January and 1 April renewal periods in 2026, and noted that approximately 85% of Florida renewals had already been placed.
KBW divided the 1 June and 1 July renewal season into three broad categories. Florida renewals, which largely take place on 1 June, were described as down between 17.5% and 20%. Nationwide programmes, more commonly renewing on 1 July, were also said to be declining by 17.5% to 20%. Retrocession business, meanwhile, was reported to be down by mid-teen percentages year-on-year, supported by stronger demand, although less bespoke retrocession placements were said to be experiencing steeper reductions.
The firm added that several market participants compared current pricing levels with those seen in 2021 and 2022, which continue to be regarded as sustainable and remain well above the market lows experienced in 2017.
In terms of demand, KBW said most catastrophe reinsurance buyers are choosing to retain savings generated by lower reinsurance costs rather than purchasing additional limits or lowering attachment points, which have remained broadly stable. An exception remains the increase in demand linked to Citizens’ largely completed depopulation process.
At the same time, KBW noted that some reinsurers are purchasing additional protection themselves, including increased retrocessional cover and, in at least one case, attractively priced catastrophe bonds aimed at managing tail risk more efficiently.
Discussing the Florida market, KBW said industry confidence is improving around the effectiveness of litigation reform measures. Even so, the prevailing view among market participants is that large nationwide insurers are still unlikely to re-enter Florida in a meaningful way because of concerns over the impact of catastrophe exposure on stakeholders. As a result, KBW said Florida is expected to remain a specialist market dominated by dedicated regional carriers, which the firm viewed positively for publicly traded homeowners insurers including AII and SLDE.
