Reinsurance/insurance industry executives told KBW that the pricing cycle looks steeper as big rate hikes in 2023 leave more room for rate cuts, while the long-term pattern of higher highs and higher lows reflects stronger risk awareness among buyers and sellers and suggests there will be interest rate easing in the coming years, albeit at a smaller rate than on Jan. 1, 2026.
Executives including Howden Re’s David Flandro, Aeolus Capital Management’s Aditya Dutt and Aon Reinsurance Solutions’ Michael Van Slooten discussed reinsurance renewals on January 1.
As we have reported extensively in Reinsurance News, reinsurance renewals on January 1, 2026 saw their largest decline in years.
Howden’s reinsurance renewal report shows that risk-adjusted global property catastrophe reinsurance online rates fell by an average of 14.7%, accelerating from the 8% decline in 2025 and marking the largest year-on-year decline since 2014.
However, KBW said that despite the sharp fall in prices, terms and conditions have remained broadly stable and points per reinsurance top-up have remained nominally unchanged, although inflation is gradually eroding real top-up levels.
“Terms and conditions have softened; some renewals have expanded coverage for terror, riot and cyber losses, and ‘frequency’ coverage (i.e., protection against smaller losses that occur frequently) is increasing, but nowhere near the levels of soft market past years. Non-contemporaneous terms and conditions in recent years (which we also view as a hard market phenomenon) will also largely disappear on January 1, 2026,” KBW observed.
Executives also reportedly told KBW that expected returns remain adequate and terms and conditions are unlikely to collapse, especially if the top seven or eight reinsurers can maintain discipline as they now have stronger data and analytics capabilities and face less mid-cap competition than they did in the previous cycle.
“The positive is that short-term returns remain strong; the more dubious view is that these returns will similarly sustain compound price competition. We believe both points are true (and we also agree that better analysis – including catastrophic modeling – should prevent the industry from fully repeating past self-inflicted damage), but in the near term we expect investors to focus primarily on the latter, meaning multiples are under pressure,” KBW added.
Regarding reinsurance demand, executives said ceding companies will either retain savings or buy more insurance, although limited overall demand growth suggests more of the former, which KBW believes reflects strengthening primary returns and lower ceding capital costs, which may make reinsurance a less attractive option.
“Similarly, slower overall revenue growth (with key exceptions) also points to continued soft pricing and is a clear warning (rightly, in our view) of the external events facing the industry, including data center-related demand growth, geopolitical uncertainty and unforeseen (but inevitable) developments,” KBW said.
As noted, executives told KBW that the relatively steeper portion of the cycle reflects a sharp increase in rates in 2023, which creates more room for declines, with one executive adding that catastrophe reinsurance pricing cycles dating back to Hurricane Andrew in 1992 have produced successively higher highs and higher lows, likely reflecting increased risk awareness among buyers and sellers.
KBW concluded: “We believe this means that catastrophe reinsurance rates will continue to decline for a few more years, but at a smaller rate than reported in January 2026.”