Falling interest rates, particularly in the real estate sector, are putting pressure on revenue growth and underwriting results for specialty insurers and reinsurers in 2026, according to recent analysis by U.S. investment bank and research firm TD Cowen.
During the recent Asia-focused April renewal period, brokers noted a 15-20% drop in Japanese property cat reinsurance pricing, a trend that will continue into the U.S. property cat market by mid-year, according to industry commentary.
Global reinsurance group Aon estimates that a 10% increase in global demand, with some insurers reducing retentions and raising limits, has been offset by a significant increase in global reinsurance capital, which will rise to $785 billion by the end of 2025.
Analysts at TD Cowen said: “The decline in April renewal rates is part of an ongoing trend in global reinsurance, as January renewal rates fell 10-15% earlier this year. We expect pricing pressure on property cat reinsurance to continue into 2026, including mid-year renewals in Florida.”
Looking ahead to mid-year renewals (primarily for the U.S., particularly Florida), analysts say reinsurance demand in Florida should increase given more than 600,000 policies have switched from private to private insurers since the end of 2024.
The analysis highlights that in the future, in the absence of very large or unexpected catastrophe losses, property cat reinsurance pricing pressure is expected to persist beyond 2026.
In March, analysts noted that E&S premiums in the three largest states (California, Florida and Texas) increased 11% year over year, an improvement from the 7% decline in January and the 2% increase in February.
TD Cowen explained: “We expect this pressure to be driven primarily by increased competition and falling rates, particularly in the real estate sector, rather than business returning to sanctioned markets. To that end, application numbers across the three stamped offices remain strong. Taking a step back, we expect the E&S line to continue to gain share in the overall property and casualty market and continue to grow, but at a slower pace relative to recent high levels.”
Additionally, casualty reinsurers are still benefiting from key rate increases at their cedants as reinsurance rates are “more stable,” analysts said, with some incremental pressure on ceded commissions.
“While we know that some cedants prefer traditional reinsurer counterparties, casualty riders, including insurance-linked securities (ILS), have begun to proliferate, creating some incremental competition and pricing pressure. While the impact on the market has been minimal to date, this is an area to watch going forward,” the report said.
Analysts expect overall disaster activity to be roughly in line with or just below normal in the first quarter, but still a substantial year-over-year improvement given the very high damage caused by California wildfires in the first quarter of 2025.
“Given the nature of activity, we expect the majority of losses to remain in the primary market, with less impact on reinsurers. Additionally, we expect losses related to the Iran war to be manageable.”