Surge in Reinsurance Capacity Drives Market Softening for 1/1 Renewals

Expanded reinsurance capacity has led to a notable softening of pricing across various lines during the January 1, 2026 renewals, as highlighted in a recent report by Guy Carpenter, the reinsurance division of Marsh.

According to Carpenter, the market is characterized by a “softening trend influenced by capital growth, one of the lowest reinsured catastrophe losses in the past decade, and robust reinsurer returns.”

Reinsurers are projected to achieve another year of strong returns in 2025, with an expected return on equity of 17.6%, following 16.4% in 2024 and 21.9% in 2023, as detailed in the January 1, 2026 Reinsurance Renewal Report.

“Reinsurers continue to benefit from high attachment points, demonstrated by reinsurers’ lower share of catastrophe loss.”

“Reinsurers’ returns are expected to comfortably exceed their cost of equity for the third consecutive year, by an average of 8.6 percentage points,” Carpenter noted, predicting that this trend will likely persist into 2026 and 2027.

Dedicated reinsurance capital is anticipated to increase by another 9% in 2025, following 7% growth in both 2023 and 2024, Carpenter added.

“Despite global trade tensions and increased regulatory scrutiny, reinsurers have managed to grow capital primarily due to strong retained earnings,” remarked Dean Klisura, president and CEO of Guy Carpenter, in a statement accompanying the report. “This growth has allowed clients to enjoy lower prices and a broader array of innovative solutions to meet their evolving needs.”

Guy Carpenter attributes the sector’s capital growth to strong underwriting profits, retained earnings, recovering asset values, and robust investor interest, particularly in alternative capital and catastrophe bonds.

Lower Catastrophe Losses

Insured catastrophe losses are estimated at $121 billion in 2025, which is 18% below the five-year inflation-adjusted average, largely due to a mild US wind season, according to the broker.

Carpenter emphasized that “reinsurers continue to benefit from high attachment points, evidenced by their lower share of catastrophe loss. This, combined with abundant capacity, is driving competitive pricing conditions, with catastrophe rate-on-line (ROL) down double digits globally.”

Excess capital positions, profitable underwriting results, and property reinsurance rates have all fueled reinsurers’ appetite for growth, Carpenter noted.

For property catastrophe placements, cedents achieved double-digit risk-adjusted rate reductions for non-loss affected programs. Additionally, reinsurance buyers sought improved risk sharing, including aggregate and catastrophe quota shares.

Demand for property catastrophe coverage increased by 5-10%, depending on the region and market segment. The report indicated that half of this increased demand was for traditional capacity, while the other half was for aggregate products, catastrophe quota shares, or alternative solutions like catastrophe bonds or parametric products.

“With excess property capacity, cedents were in a position of leverage and aggressively pursued favorable renewal terms,” Carpenter stated. “This allowed for a broader range of utilization of reinsurers’ offered lines.”

Cat Bonds Hit All-Time Highs

Strong investor interest in insurance-linked securities (ILS) has also contributed to softer property market conditions.

Carpenter reported that the total outstanding notional amount of property and cyber catastrophe bonds has reached an all-time high of over US$58 billion, including 15 first-time sponsors in 2025.

“The issuance activity in 2025 has been driven by sponsors attracted to the bond market for various reasons, including favorable pricing, broadened terms and conditions (e.g., expanded perils, aggregates, second event covers), and excess capacity,” the report explained. “Investors have also been drawn to the bond market due to relative spreads compared to other asset classes, market liquidity, and limited loss activity.”

Casualty Reinsurance

Cedents’ outcomes for casualty reinsurance renewals varied based on region, structure, historical results, and the scale of the outward portfolio, according to Carpenter.

Generally, program renewals remained stable, with some improvements for clients with proportional structures demonstrating portfolio discipline and strong overall performance. The report noted that clients continued to seek reinsurers to support treaties across various lines of business.

“For the January 1, 2026 renewal cycle, the more challenging casualty renewals were traded for property positions, contrasting with the trade that occurred during the 2023 renewal cycle,” Guy Carpenter stated.

Ceding company clients are maintaining discipline regarding limit management, terms and conditions offered to their original customers, and ensuring appropriate attachment points.

Carpenter indicated that pricing varies from positive (US exposed liability) to negative (E&O/PI, non-US exposed liability) and everything in between (US D&O). “[T]he structural changes clients have implemented within their portfolios are instilling greater confidence for re/insurers amid rising US litigation costs.”

Ongoing discipline has kept reinsurers’ loss trends relatively stable year-over-year, as shorter limit deployment has proven effective in managing loss severity trends.

Cyber Market

“The cyber market continues to evolve from quota share and aggregate protection to treaties with specific event, risk, and hybrid designs,” the report noted, highlighting a growing interest in tailored solutions that better address volatility and aggregation challenges.

Carpenter elaborated on additional cyber trends observed during the renewals in a spotlight on page 14 of the report, which include:

• Cyber pricing remained under pressure, with ceding commissions ending flat to +2 points, and non-proportional rates reduced by -2.5% to -25%.
• The cyber market saw improvements in terms and conditions for cedents, particularly in expanding definitions.
• Retentions remained stable, with increasing demand for non-proportional covers. New structures placed at January 1 include risk XoL, hard retrocession, and combined property/cyber tail covers.
• Cedents showed a heightened appetite for non-proportional solutions and diversifying their panels, alongside a growing interest in exploring new retro purchases from reinsurers.

For more detailed reinsurance market data and executive leadership insights, visit Guy Carpenter’s Renewal Resource Center.

Topics
Pricing Trends
Reinsurance

Expanded reinsurance capacity has led to a notable softening of pricing across various lines during the January 1, 2026 renewals, as highlighted in a recent report by Guy Carpenter, the reinsurance division of Marsh.

According to Carpenter, the market is characterized by a “softening trend influenced by capital growth, one of the lowest reinsured catastrophe losses in the past decade, and robust reinsurer returns.”

Reinsurers are projected to achieve another year of strong returns in 2025, with an expected return on equity of 17.6%, following 16.4% in 2024 and 21.9% in 2023, as detailed in the January 1, 2026 Reinsurance Renewal Report.

“Reinsurers continue to benefit from high attachment points, demonstrated by reinsurers’ lower share of catastrophe loss.”

“Reinsurers’ returns are expected to comfortably exceed their cost of equity for the third consecutive year, by an average of 8.6 percentage points,” Carpenter noted, predicting that this trend will likely persist into 2026 and 2027.

Dedicated reinsurance capital is anticipated to increase by another 9% in 2025, following 7% growth in both 2023 and 2024, Carpenter added.

“Despite global trade tensions and increased regulatory scrutiny, reinsurers have managed to grow capital primarily due to strong retained earnings,” remarked Dean Klisura, president and CEO of Guy Carpenter, in a statement accompanying the report. “This growth has allowed clients to enjoy lower prices and a broader array of innovative solutions to meet their evolving needs.”

Guy Carpenter attributes the sector’s capital growth to strong underwriting profits, retained earnings, recovering asset values, and robust investor interest, particularly in alternative capital and catastrophe bonds.

Lower Catastrophe Losses

Insured catastrophe losses are estimated at $121 billion in 2025, which is 18% below the five-year inflation-adjusted average, largely due to a mild US wind season, according to the broker.

Carpenter emphasized that “reinsurers continue to benefit from high attachment points, evidenced by their lower share of catastrophe loss. This, combined with abundant capacity, is driving competitive pricing conditions, with catastrophe rate-on-line (ROL) down double digits globally.”

Excess capital positions, profitable underwriting results, and property reinsurance rates have all fueled reinsurers’ appetite for growth, Carpenter noted.

For property catastrophe placements, cedents achieved double-digit risk-adjusted rate reductions for non-loss affected programs. Additionally, reinsurance buyers sought improved risk sharing, including aggregate and catastrophe quota shares.

Demand for property catastrophe coverage increased by 5-10%, depending on the region and market segment. The report indicated that half of this increased demand was for traditional capacity, while the other half was for aggregate products, catastrophe quota shares, or alternative solutions like catastrophe bonds or parametric products.

“With excess property capacity, cedents were in a position of leverage and aggressively pursued favorable renewal terms,” Carpenter stated. “This allowed for a broader range of utilization of reinsurers’ offered lines.”

Cat Bonds Hit All-Time Highs

Strong investor interest in insurance-linked securities (ILS) has also contributed to softer property market conditions.

Carpenter reported that the total outstanding notional amount of property and cyber catastrophe bonds has reached an all-time high of over US$58 billion, including 15 first-time sponsors in 2025.

“The issuance activity in 2025 has been driven by sponsors attracted to the bond market for various reasons, including favorable pricing, broadened terms and conditions (e.g., expanded perils, aggregates, second event covers), and excess capacity,” the report explained. “Investors have also been drawn to the bond market due to relative spreads compared to other asset classes, market liquidity, and limited loss activity.”

Casualty Reinsurance

Cedents’ outcomes for casualty reinsurance renewals varied based on region, structure, historical results, and the scale of the outward portfolio, according to Carpenter.

Generally, program renewals remained stable, with some improvements for clients with proportional structures demonstrating portfolio discipline and strong overall performance. The report noted that clients continued to seek reinsurers to support treaties across various lines of business.

“For the January 1, 2026 renewal cycle, the more challenging casualty renewals were traded for property positions, contrasting with the trade that occurred during the 2023 renewal cycle,” Guy Carpenter stated.

Ceding company clients are maintaining discipline regarding limit management, terms and conditions offered to their original customers, and ensuring appropriate attachment points.

Carpenter indicated that pricing varies from positive (US exposed liability) to negative (E&O/PI, non-US exposed liability) and everything in between (US D&O). “[T]he structural changes clients have implemented within their portfolios are instilling greater confidence for re/insurers amid rising US litigation costs.”

Ongoing discipline has kept reinsurers’ loss trends relatively stable year-over-year, as shorter limit deployment has proven effective in managing loss severity trends.

Cyber Market

“The cyber market continues to evolve from quota share and aggregate protection to treaties with specific event, risk, and hybrid designs,” the report noted, highlighting a growing interest in tailored solutions that better address volatility and aggregation challenges.

Carpenter elaborated on additional cyber trends observed during the renewals in a spotlight on page 14 of the report, which include:

• Cyber pricing remained under pressure, with ceding commissions ending flat to +2 points, and non-proportional rates reduced by -2.5% to -25%.
• The cyber market saw improvements in terms and conditions for cedents, particularly in expanding definitions.
• Retentions remained stable, with increasing demand for non-proportional covers. New structures placed at January 1 include risk XoL, hard retrocession, and combined property/cyber tail covers.
• Cedents showed a heightened appetite for non-proportional solutions and diversifying their panels, alongside a growing interest in exploring new retro purchases from reinsurers.

For more detailed reinsurance market data and executive leadership insights, visit Guy Carpenter’s Renewal Resource Center.

Topics
Pricing Trends
Reinsurance