US-based global credit ratings agency KBRA said more favorable reinsurance conditions are providing insurers with stronger protection ahead of the 2026 Atlantic hurricane season, although it warned that a calmer seasonal outlook did not eliminate the threat of major catastrophe losses.
The rating agency believes that while underwriting discipline and program structure remain critical, greater reinsurance availability, lower renewal pricing and expanding alternative capital have strengthened insurers’ financial resilience.
While forecasts indicate below-average Atlantic hurricane activity in 2026, KBRA emphasizes that seasonal forecasts cannot predict landfall, meaning a single hurricane affecting heavily insured coastal areas could still result in significant insured losses.
As a result, the agency said disaster preparedness still depends more on capital strength and reinsurance protection than expectations of reduced storm frequency. KBRA views continued weakness in the reinsurance market as one of the most important developments of the quarter.
The broker’s January, April and mid-year renewal reports for 2026 highlighted that sufficient capacity from traditional reinsurers and insurance-linked securities (ILS) investors has resulted in more favorable renewal outcomes for cedents, with KBRA-rated insurers reporting property catastrophe reinsurance price drops of 10% to 25% at June 2026 renewals.
These cuts come despite global natural catastrophe insured losses exceeding $100 billion in 2025, highlighting the depth of capital available across the market.
KBRA noted that while pricing slowed for the second consecutive year, reinsurance rates remain well above pre-2017 hard market levels. The ratings agency attributes the increase in market capacity to continued growth in alternative capital, including record cat bond and ILS issuance, as well as expansion of traditional reinsurance capital as premium revenue from previous renewal years continues to flow in.
The agency also highlighted a significant shift in disaster planning structures. During hard markets, insurers often retain more working-tier exposures or rely on captive arrangements because lower-tier protection becomes difficult and expensive. KBRA said reinsurers are now competing more aggressively at these lower tiers, while capacity at higher attachment points remains sufficient, resulting in more competitive plan pricing across the market.
However, KBRA warns that cheaper reinsurance should not automatically be viewed as a credit positive. The agency said the benefits of lower reinsurance costs can only be realized if the ceding company maintains appropriate pricing, maintains appropriate retention levels and continues to manage counterparty, recovery and exhaustion risks throughout the program.
In addition to pricing, KBRA said insurers now have access to a wider range of risk transfer solutions than during the hard market period. The agency noted that the return of total and multi-event coverage, along with a strong catastrophe bond market, gives cedants greater flexibility when structuring their reinsurance programs.
Combining traditional reinsurance with catastrophe bonds, total protection and, where appropriate, well-capitalized captives can enhance overall program resiliency by diversifying capacity providers and claims resources, KBRA said.
KBRA believes stronger reinsurance protection complements the improving capital position of the U.S. property and casualty insurance industry. The agency said most rated insurers entered hurricane season with record surplus levels and stronger reserves, making major catastrophes more likely to impact earnings rather than capital. However, despite a more favorable reinsurance environment, smaller regional insurers and specialty coastal carriers remain more vulnerable to catastrophe volatility.
The ratings agency also warned that increased competition after reaching profitability in 2025 could offset some of the benefits of lower reinsurance costs. KBRA said insurers that expand coverage too aggressively or lower premium rates could erode underwriting profits, especially if pricing declines exceed savings achieved through cheaper reinsurance. An active hurricane season or a massive landfall could quickly reverse near-term profitability, especially for disaster-stricken regional airlines.
Looking ahead, KBRA said its Insurance Financial Strength Ratings continue to place a high priority on the quality and effectiveness of insurers’ reinsurance arrangements. The agency assesses catastrophe risk through stress tests of capital adequacy, reinsurance protection, operating performance, liquidity and enterprise risk management, rather than relying on seasonal hurricane forecasts.
KBRA added that while isolated rating downgrades are still possible where insurers demonstrate inadequate pricing, reserves or reinsurance protection, most rated insurers should be able to absorb catastrophe losses without severely impacting claims ability unless the 2026 hurricane season is much worse than expected.
