In a recent Love Actuary report, JPMorgan analysts highlighted that reinsurance pricing will continue to weaken in 2027, barring huge industry catastrophe losses.
Reinsurance price softening has clearly accelerated in 2026, a trend that is unlikely to stop as mid-year renewals approach, driven by strong surplus capital levels and impressive first-quarter 2026 earnings.
The report said that a huge capital glut is seriously tipping the balance and becoming the main culprit for falling interest rates. JPMorgan stressed that the funding must be weighed against market demand.
“Overall capital levels are high but need to be considered relative to demand. Prime broker reports always point to the absolute level of capital available to the industry as a reason why prices should soften,” the analysts said.
“According to Aon, the reinsurance industry is estimated to be capitalized at $760 billion in FY25, up 32% since FY22. We believe that to fully assess the situation we also need to consider the demand side. We believe global non-life insurance premiums are a good indicator of demand.”
JPMorgan uses global non-life insurance premiums as a proxy for demand and estimates the market is now saturated, with remaining capital of about $125 billion
The report explains: “Comparing reinsurance capital to premiums at the end of 2022 (the period when the market last turned), capital represented approximately 14.5% of global non-life insurance premiums.
“For FY25, the capital to premium ratio is approximately 17.5%, and if we assume that capital to premium ratio levels need to be similar to those in 2022, this suggests that there is approximately $125 billion of remaining reinsurance capital in the market.”
The sheer loss-absorbing capacity of current markets means that even a highly active disaster year is unlikely to trigger market hardening.
Using historical market shares lost in its emergency database, JPMorgan calculated that “to eliminate underwriting profits for Europe’s largest reinsurers, industry losses would need to reach approximately $120 billion, on top of this year’s normal catastrophe burden. This suggests that catastrophe losses would need to exceed $200 billion this year.”
Reinsurance renewals this year have gradually worsened, with the property catastrophe payout line falling by 12% at renewal time in January, and this downward trend accelerated to the mid-teens at renewal time in April.
Looking at Florida’s June 1 renewals, disaster line pricing is expected to get worse again. The main catalyst for this decline is Florida’s recent legal environment, the report said.
“Florida’s tort reform will likely reduce litigation in the state, so we wouldn’t be surprised if overall prices fell by about 20% or more,” the analysts said.
Adding: “Based on Howden’s data, this still suggests pricing in Florida is still at reasonable levels, but the super-normal profit levels of recent years may be behind us.
“We believe overcapitalization issues in the reinsurance market are likely to lead to continued weakness in the reinsurance market. If 2026 becomes a ‘normal’ year of large losses, ROE will strengthen again and we believe pricing will inevitably continue to be soft into 2027.”
