Abundant Reinsurance Capacity Accelerates Market Softening During 1/1 Renewals

Expanded reinsurance capacity resulted in accelerated softening of pricing across many lines during the January 1, 2026 renewals, according to a report issued by Guy Carpenter, the reinsurance business of Marsh.

Carpenter described a “softening market shaped by capital growth, one of the lowest reinsured catastrophe losses in past 10 years, and strong reinsurer returns.”

Reinsurers expected to achieve another year of strong returns in 2025, at a 17.6% return on equity, following 16.4% in 2024 and 21.9% in 2023, said the broker’s “January 1, 2026 Reinsurance Renewal Report.”

“Reinsurers’ returns are expected to comfortably exceed their cost of equity for the third year in a row, by an average 8.6 percentage points…,” Carpenter said, predicting this trend will likely continue into 2026 and 2027.

Dedicated reinsurance capital is expected to increase another 9% in 2025, after 7% increases in both 2023 and 2024, Carpenter added.

“Despite global trade tensions and increased regulatory scrutiny, reinsurers have grown capital due largely to strong retained earnings,” commented Dean Klisura, president and CEO, Guy Carpenter, in a statement accompanying the report. “This has allowed clients to benefit from lower prices and a wider range of innovative solutions to meet their rapidly evolving needs.”

Guy Carpenter attributed 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 to be $121 billion in 2025, 18% below the five-year inflation-adjusted average, due to a benign US wind season, the broker said.

Carpenter noted that “reinsurers continue to benefit from high attachment points, demonstrated by reinsurers’ lower share of catastrophe loss. This factor, along with abundant capacity, are driving competitive pricing conditions, with catastrophe rate-on-line (ROL) down double digits globally.”

Excess capital positions, profitable underwriting results, and property reinsurance rates all drove reinsurers’ appetite for growth, Carpenter continued.

For property catastrophe placements, cedents were able to achieve double-digit risk-adjusted rate reductions for non-loss affected programs. In addition, reinsurance buyers sought better risk sharing, such as aggregate and catastrophe quota shares.

Property catastrophe demand increased 5-10%, depending on the region and segment of the market, the report said, explaining that half of increased demand was for traditional capacity, while the other half of additional demand was for aggregate products, catastrophe quota shares or alternative solutions, such as catastrophe bonds or parametric products.

“With excess property capacity, cedents were in a position of leverage and pursued renewal terms aggressively,” Carpenter said. “With the ability to choose reinsurance partners, we observed a wider range of utilization of reinsurers’ offered lines.”

Cat Bonds Hit All-Time Highs

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

Carpenter said the total outstanding notional amount of property and cyber catastrophe bonds has now reached an all-time high of more than US$58 billion, which includes 15 first-time sponsors in 2025.

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

Casualty Reinsurance

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

Generally, program renewals were stable with some cases of improvement for clients with proportional structures which demonstrated portfolio discipline and strong overall performance, the report said, adding that clients continued to look for reinsurers to support treaties across lines of business.

“For the January 1, 2026 renewal cycle, the more difficult casualty renewals were traded for property positions – which is the opposite of the trade that took place during the 2023 renewal cycle, for example,” Guy Carpenter said.

Ceding company clients are remaining disciplined “with respect to limit management, terms and conditions being offered to their original customers, and maintaining appropriate attachment points.”

Carpenter said pricing varies from positive (US exposed liability) to negative (E&O/PI, non-US exposed liability) and everywhere in between (US D&O). “[T]he structural changes that clients have implemented within their portfolios are giving greater confidence for re/insurers in the face of continued increases in US litigation cost.”

Ongoing discipline has kept reinsurers’ loss trends relatively stable year-over-year, “as shorter limit deployment is proving very effective at managing loss severity trend.”

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 said, explaining that there is greater interest in more tailored solutions that better address volatility and aggregation challenges.

Carpenter went on to discuss additional cyber trends seen during the renewals in a spotlight on page 14 of the report, which include:

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

Reinsurance market data charts and additional executive leadership quotes are available on Guy Carpenter’s Renewal Resource Center.