RBC Capital Markets, the investment banking and capital markets business unit of Royal Bank of Canada, expects the U.S. property and casualty (P&C) insurance industry to remain competitive, with soft prime property pricing and a possible rise in catastrophe losses that could impact earnings for insurers and insurance brokers.
The real estate market continues to face a competitive pricing environment, especially in the second quarter, which is the busiest period for U.S. property insurance renewals, accounting for about 30% of annual premiums, according to RBC Capital Markets.
The company believes that headwinds in major real estate pricing and the recent June 1 reinsurance renewal, which reduced real estate catastrophe rates by 15% to 20%, indicate that intense competition continues,
RBC Capital Markets said these market conditions have been widely seen as posing challenges to insurance brokers, although they could also pose downside risks to insurers if premium growth weakens more than investors currently expect.
Despite the difficult operating environment, the company noted there are early signs that investor confidence in the industry is starting to improve after a long period of pessimism. Looking ahead to second-quarter earnings, RBC Capital Markets expects management to continue reporting negative trends in real estate pricing.
The company said industry pricing surveys continue to point to further softening in primary property and casualty insurance rates, while the latest reinsurance renewals highlight the level of competition across the market. Against this backdrop, RBC Capital Markets expects modest revenue growth for insurance brokers, while suggesting that insurers themselves may be more vulnerable to disappointing growth figures.
Analysts also expect catastrophe losses to play a more significant role in second-quarter financial results compared with the same period last year. While this period is not typically associated with the largest catastrophic events in the United States, the company notes that it coincides with the peak season for severe convective storms, including tornadoes, hail and damaging wind events that can cause large insured losses.
In addition to severe weather, RBC Capital Markets sees the ongoing conflict involving Iran and the impact of Tropical Storm Arthur as potential factors for catastrophe claims in the quarter. The company expects most insurers in its coverage to report higher catastrophe losses than in the second quarter of 2025.
RBC Capital Markets, using data released by the National Oceanic and Atmospheric Administration (NOAA) and the National Weather Service, observed that the total number of severe convective storm events is lower than this time last year.
However, the company argued that the location of these events is often more important than their overall frequency in determining insured losses. It highlighted particularly severe tornado and hail activity in the Great Lakes region and surrounding Midwestern states between April and June, which it argued could lead to an increase in claims despite a low number of events.
RBC Capital Markets also expects additional losses in the second quarter for insurers affected by the Iran conflict. The company highlighted Arch Capital Group, American International Group, Axis Capital and International General Insurance as companies that disclosed exposure in the first quarter and said conflict-related losses were likely to continue while hostilities continued.
RBC Capital Markets added that further attacks on ships in the Strait of Hormuz late in the quarter could also prompt companies to provide an early indication of the possible impact in the third quarter on earnings calls.
