Reinsurance renewal season begins with lower property rates expected

MONTE CARLO, Monaco — Property catastrophe reinsurance rates will likely decrease during year-end renewals but remain high enough for reinsurers to make a healthy profit, experts say.

Increased capacity from retained earnings over the past two years of high pricing has introduced more competition to the market; however, major reinsurers say they will uphold their underwriting discipline.

In addition, retentions remain elevated, putting reinsurers in a good position to withstand some rate decreases, observers said during the Rendez-Vous de Septembre reinsurance meeting last week.

Cedents and brokers, though, are pressuring reinsurers to offer broader protection, including aggregate coverage to handle multiple events in the same year.

The Rendez-Vous is the first of several major reinsurance meetings held in late summer and early fall at which reinsurers and brokers meet in the run-up to Jan. 1 renewals, a key date for the industry.

Reinsurers have enjoyed a profitable couple of years since a reset on pricing and terms and conditions in 2023, and they’re looking to expand their businesses further, brokers and reinsurers said.

Pricing

“We’re just in a market where there is excess capital and there’s a supply-demand imbalance, and reinsurers do want to grow because results have been good,” said Timothy Gardner, CEO of New York-based Lockton Re, the reinsurance brokerage unit of Lockton.

Absent a significant catastrophe loss in the remainder of the year, property catastrophe rates will likely fall 10% to 15% during year-end renewals, Mr. Gardner said.

With retained earnings, reinsurers have added capacity at a faster rate than demand for coverage, said Brian Flasinski, CEO of Gallagher Re, North America, a unit of Arthur J. Gallagher & Co.

“You would imagine pressures downwards, but to what magnitude and where that will go, time will tell. Let’s see what happens with the hurricane season,” Mr. Flasinski said.

Any decreases will be from near historic highs, said David Duffy, president, global clients, at Guy Carpenter & Co.

“If you look at the rate on line index over time, we were at historic highs in 2024, and it came down slightly in 2025, and it’ll come down some more in 2026, but from an all-time high level,” Mr. Duffy said.

Rates will still vary significantly by cedent, said Marcus Winter, president and CEO of Munich Re North America property/casualty.

At midyear renewals, some higher-layer treaties for Florida exposures saw 15% decreases, in part due to tort reform in the state, but some treaties hit by California wildfires increased 30%, he said.

“It really depends on the structures, it depends on the geographic exposures, it depends on the loss experience,” Mr. Winter said.

Property reinsurance rates may decrease overall, but they are still tied to loss experience, said Brian Duperreault, an industry veteran and executive chairman of recently launched Mereo Insurance.

“If you have a client that hasn’t had any losses, then there’s going to be a rate reduction. If somebody has losses, they have a rate increase, and it tracks quite closely,” he said.

Terms and conditions

Attachment points for reinsurance treaties are unlikely to fall, several experts said.

In the softening market, cedents will likely see improved coverage terms and conditions, but reinsurers are unlikely to offer significant reductions in retention points, Mr. Gardner said.

“I don’t see attachment points going from the one-in-15-year return period to the one-in-five again,” he said.

Several discussions at the meeting centered on aggregate covers, which protect against cumulative losses over multiple events in the same year. Reinsurers pulled back from offering aggregate covers in recent years after significant losses from severe convective storms and other climate-related catastrophes.

While there are more aggregate covers in the market this year, they often have retentions of $50 million or more per event, Mr. Winter said.

“That’s something very different to when you have every rainy Sunday afternoon in Idaho, being aggregated with every rainy Sunday afternoon in Kentucky,” he said.

Cedents are interested in buying more aggregate coverage, and it can be obtained via a variety of structures, Mr. Duffy said.

Existing annual aggregate and multiyear products, structured risk products and per-occurrence coverages that respond to multiple events could be more widely offered or developed, he said.

“It’s clearly not an inexpensive product, but depending on the probability of attachment, the probability of exit, the perils covered, there’s a range of products out there from high-single-digit rate-on-lines upwards,” he said.

Brokers are looking to work with reinsurers to develop innovative coverages, Mr. Flasinski said.

“While it may be an earnings aggregate for some, it may be lower-down cat layers, or it may be different risk programs. Whatever it may be, it’s bringing innovative solutions,” he said.

New capital

Most of the new capital flowing into the traditional market comes from the retained earnings of existing reinsurers rather than new players, although new capital is entering the insurance-linked securities market, Mr. Duffy said.

While some reinsurers may increase dividends to return earnings to shareholders, even with rate decreases, reinsurers are expected to continue reporting returns on equity in the “mid-teens,” he said.

“There’s still an appetite to put money to work at those kinds of returns,” Mr. Duffy said.

In addition, demand for reinsurance is expected to rise in 2026, driven by underlying inflation and changes in catastrophe models where secondary peril exposures are being reevaluated, he said.

While Mereo is one of the few new entrants in the market, existing companies continue to grow capital, Mr. Duperreault said.

“My guess would be that the industry isn’t quite sure that things are that great,” he said.