Reinsurance pricing declined at the January 2026 renewals, with property and most specialty lines seeing notable decreases, according to Moody's.
The rating agency attributed the softening market to a record supply of reinsurance capital, driven by three years of earnings growth and record catastrophe bond issuance.
Howden Re previously reported that risk-adjusted global property-catastrophe reinsurance rates-on-line declined by an average of 14.7% at the January 2026 renewals. This compares with an 8% reduction in 2025 and represents the largest annual decrease since 2014.
The January renewals mark an acceleration of the downward pricing trend that began after the market peaked two years ago. Moody's said market competition has increased as reinsurers look to deploy available capital.
AM Best revised its outlook for global non-life reinsurance to stable from positive, noting reinsurance rates dropped between 10% and 20% during the renewal period.
Reinsurance capacity is projected to enter 2026 at record levels, with approximately US$540 billion in traditional dedicated reinsurance capital and US$120 billion in insurance-linked securities capital.
The magnitude of the decline echoes the 2013-2014 softening cycle, when analysts forecast rate reductions of 10-14% driven by similar forces: surging capital inflows, a maturing catastrophe bond market, and moderate loss years. Today's ILS market has grown substantially since then, when outstanding cat bonds first reached US$20.5 billion.
However, market participants note key differences from the previous cycle. Attachment points remain elevated by historical standards and terms are tighter, with capital being deployed more selectively. David Flandro of Howden Re described the current environment as "a market that is softening but still rational."
Global insured catastrophe losses exceeded US$100 billion for the sixth consecutive year in 2025, according to Moody's. However, severe convective storms made up a large portion of these losses, which were largely retained by primary insurers.
Reinsurers sustained losses from the January 2025 California wildfires, but the Atlantic hurricane season was relatively quiet, with no hurricanes making landfall in the continental US. As a result, reinsurers are expected to report strong profitability for 2025.
Without a major catastrophe loss event, pricing is likely to continue its downward drift at the April and July renewals—key dates for Japanese and US reinsurance contracts, respectively.
Primary insurers saw pricing decreases at the January 2026 renewals, particularly for risk-remote property layers. Whether these savings flow through to end consumers remains uncertain, though state regulators – particularly in distressed markets such as California and Florida – may pressure insurers to pass on relief.
Attachment points have remained largely stable, though the competitive environment has led to some relaxation of the terms established during the January 2023 renewals.
Reinsurers are also expanding their exposure to frequency-related coverages, including aggregate reinsurance and second and third event coverages.
While risk-adjusted returns remain attractive, Moody's expects reinsurers to return more capital to shareholders through dividends and share buybacks as underwriting returns decline.
