J.P. Morgan said the expected price decline of the reinsurance market of 10–20% at the January 2027 renewals is less than the reduction in previous years, implying some stabilisation.
The global investment bank and financial services firm said reinsurance pricing remains under pressure, particularly in property catastrophe, but also in specialty lines.
J.P. Morgan expects reinsurance pricing to decline at the upcoming January 2027 renewals unless a significant enough catastrophe event occurs late in the year, coupled with significant capital market volatility.
Gallagher Re estimates that for the reinsurance market to make its cost of equity for 2026, an incremental $50-75 billion of catastrophe losses have to occur in the second half of 2026.
Factoring in the excess capital that has accumulated in the market over the past several years, this estimate rises to close to $150 billion in additional losses.
J.P. Morgan noted that terms and conditions appear to be broadly holding, although there are signs of some loosening, particularly around aggregate covers (attachment points on excess treaties are largely unchanged for now).
J.P. Morgan said it will closely monitor the growing presence of new forms of third-party capital, such as captive reinsurers or brokered facilities partially backed by capital from private credit firms, suggesting this will likely have negative consequences for the reinsurance market.
The firm also noted that competition in commercial lines is most acute in property, although price decreases have become widespread across other lines and account sizes.
“Overall commercial lines pricing in the US started decelerating in 2023, with most of the decline led by commercial property, which experienced the most premium growth and margin expansion at the peak of the hard market,” said J.P. Morgan.
J.P. Morgan said casualty pricing has also been declining, but more gradually, partly because profitability in the line has been less robust than in property.
“This is evidenced by industry accident year loss picks (other liability occurrence and claims made) increasing over the past several years, coupled with reserve charges on general liability lines from the “hard market” accident years of 2021- 2024,” the firm said.
“Although we think the casualty loss environment is largely unchanged from several years ago, and that casualty claim costs are likely increasing at a mid-single- digit pace or greater, the most recent industry pricing surveys point to casualty price increases of only low-to-mid single digits, implying likely margin deterioration in casualty attritional loss picks for the overall market.”
J.P. Morgan continued, “In our view, any desire by the industry to have a “floor” on casualty pricing given the challenging claims environment is likely being overcome by higher investment income (driven by higher interest rates) and companies’ more efficient expense structures (largely due to premiums inflated the past hard market cycle), both of which allow for more competitive pricing.”
