According to USI Insurance Services’ 2026 Commercial Property and Casualty Market Outlook report, the competitive environment will undoubtedly weaken some insulation reinsurers with strong reputations in difficult markets.
USI said that as the market changes, the current rates, attachment points and terms that reinsurers strive to maintain are facing significant challenges from a market with ample capacity.
Reinsurers have benefited from the hard market over the past few years, with high treaty attachment points pushing the bulk of catastrophe losses to major insurers.
In the first half of 2025, losses from natural disasters were unusually high, estimated at more than $80 billion globally. Later in the year, the property insurance industry experienced a quiet hurricane season, limiting total global catastrophe losses to about $107 billion, well below previous forecasts of more than $150 billion.
This stability drove rate increases in the second half of the year, with declines of up to 35% for shared placement and excess catastrophe policies, the report explains.
Now, a USI report indicates a change. According to reports, this new competitive environment has once again exposed reinsurers to those huge losses that are mainly borne by insurance companies, namely losses from secondary disasters such as severe convective storms, wildfires and floods.
While higher combined ratios are expected to reduce reinsurer profitability, the industry remains resilient, with reinsurers having strong balance sheets and available surpluses to weather softening rates or any potential increase in loss activity.
A key driver of this change is the influx of capital into the reinsurance industry. The report states that by the end of 2025, both traditional and alternative capital will have reached record highs.
The analysis noted that “both traditional and alternative capital (e.g., insurance-linked securities, sidecars, catastrophe bonds) reached record funding levels in 2025, with alternative capital accounting for approximately $121B, or approximately 19%, of all dedicated reinsurance capital.”
Adding: “Returns offered by the sector remain attractive, real estate rates remain adequate, and a quiet hurricane season drives favorable loss ratios. Therefore, capital flows are expected to continue until rate adequacy is challenged, a large-scale CAT event causes combined ratios to rise, or macroeconomic pressures limit the amount of capital available in the market.”
Given the stability and conditions of the reinsurance market, treaty renewal is expected to be broadly beneficial to insurers. This also paves the way for a softer pricing environment in the first half of 2026.
For non-catastrophe properties with minimal loss history and favorable risk profiles, rates range from -10% to flat in the second half of 2025 and are expected to remain unchanged in the first half of 2026, according to USI.
Rates for catastrophe properties with minimal loss history and good risk profiles range from -30% to -10% in the second half of 2025, and are expected to drop to -20% to -5% in the first half of 2026.
For catastrophe or non-catastrophe properties with adverse loss histories or risk profiles, rates range from -15% to 5% in the second half of 2025 and are expected to remain unchanged in the first half of 2026.
Analysts concluded that real estate market competition will remain strong in the first half of 2026, following low losses and favorable treaty renewals in 2025, with single-carrier insurers seeing wider rate reductions. The shared and layered space for high-quality risks will continue to soften.
This environment allows insureds to obtain higher limits, broader terms, and higher deductibles. Additionally, the increased capacity enables buyers to consolidate multiple locations into a master policy or use parametric coverage to reduce retention.