The global facultative reinsurance market has shifted to buyer-friendly conditions at the January 2026 renewals, with rate reductions recorded across most lines and regions as capital availability and expanding carrier appetite reshaped negotiations.
According to a market report from Gallagher Re, the shift was driven by improved technical results and continued capacity inflows, with stronger risks securing larger decreases.
The findings align with a separate assessment from Moody's, which described the current rate environment as the steepest price decline in over a decade.
The ratings agency attributed the softening to a record supply of reinsurance capital, driven by three years of earnings growth and record catastrophe bond issuance.
Moody's noted that the magnitude of the decline echoes the 2013-2014 softening cycle. Reinsurance capacity is projected at approximately US$540 billion in traditional capital and US$120 billion in ILS capital.
The facultative softening mirrors broader trends in treaty reinsurance. According to Howden Re, risk-adjusted pricing for property catastrophe treaty business declined by 14.7% at January 2026 – the largest year-on-year reduction since 2014 – while retrocession pricing fell by 16.5%. Global direct and facultative reinsurance recorded average risk-adjusted reductions of 15% to 20%.
Property markets recorded the largest rate declines globally. In the US and Canada, average rates fell by 25% to 30%, with loss-affected accounts also seeing double-digit reductions. The report noted that new MGAs and consortiums have added to competitive pressure.
Latin America and the Caribbean saw reductions of 10% to 20%, while Chile and Argentina recorded steeper cuts of 30% to 40% on loss-free risks. Australia and New Zealand declined by 15% to 20%, with some high-hazard sectors experiencing reductions of up to 30%.
The UK recorded rate declines of 25% to 30%, with some reaching 40%, which Gallagher Re attributed to carrier growth targets. Japan saw modest reductions of 3% to 5%, while South Korea continued a five-year softening trend with large accounts down more than 20% annually.
North American casualty conditions were mixed. Auto liability remained under pressure with rate increases of 10% to 25% due to nuclear verdict activity, while umbrella and excess markets continued double-digit increases for the seventh consecutive year. In the UK and international markets, facultative rates are expected to decline by 5% to 20%.
Energy markets continued softening despite downstream losses totaling approximately US$4.5 billion in 2025, which exceeded market premium income. US rates declined by 5% to 10%, while the Middle East and Asia saw reductions of 35% to 40%.
Market participants expect current conditions to persist through 2026, subject to loss activity and capital costs. David Flandro, head of industry analysis at Howden Re, said this is "not a return to the underwriting practices of the last soft market," noting that attachments remain elevated and terms tighter than in previous cycles.
J.P. Morgan analysts project prices to remain soft through mid-year 2026 renewals, adding that a turnaround is "unlikely unless the P&C sector faces insured losses of US$100 billion or higher."
