Moody’s is concerned about the outlook for property and casualty reinsurance in that year if the recent trend of lower interest rates and progressive softening of terms and conditions continues into 2027, TD Cowen reported after a recent conference call with the ratings agency.
On January 16, 2026, TD Cowen hosted a conference call regarding the 2026 outlook with Sarah Hibler, deputy managing director of Moody’s North America Property & Casualty Insurance, and members of her team, including Bruce Ballentine, Jasper Cooper, Evelyn Ocas Salazar and Laline Carvalho-Neff.
In the conference call, Moody’s emphasized that starting from January 1, 2026, the pricing of property catastrophe reinsurance will decline at an accelerated pace, with risk-adjusted rates falling by 10-20%.
For example, global re/insurance brokerage group Howden stated in its renewal report that risk-adjusted global property catastrophe reinsurance online rates will fall by an average of 14.7%, accelerating from the 8% decline in 2025, marking the largest year-on-year decline since 2014.
Moody’s added that there is a growing imbalance between supply and demand, and industry capital has increased significantly due to higher retained earnings and growth in alternative capital, which Gallagher Re expects will grow by 12% in 2025 and currently accounts for approximately 15% of total industry capital.
The ratings agency also noted increased interest from reinsurers in offering comprehensive coverage, which has historically been a source of significant losses but has decreased in 2023 as the housing market resets and sellers release collateral.
Looking ahead, TD Cowen said Moody’s expected the recent trend of lower interest rates and softening terms and conditions to continue in 2026. Despite this pressure, Moody’s expects reinsurance profitability to remain solid in 2026, but expresses greater concern about the outlook for 2027 if these trends persist.
TD Cowen said: “In the casualty and specialty reinsurance space, Moody’s said casualty reinsurance pricing will be flat through 2026, with increased pressure on certain lines and accounts. Similarly, Moody’s has seen lower premium rates for certain specialty reinsurance lines. This is consistent with what appears to be increased interest from alternative capital providers in underwriting long-tail lines, as Moody’s noted interest from certain insurance-related security providers in cyber and certain other casualty lines.”
Moody’s also noted that disaster modelers have increasingly focused on wildfires and severe convective storms in recent years because these secondary hazards account for a larger share of overall disaster losses and are less mature and tested than hurricane and earthquake models.
In response, underwriters have refocused their efforts on understanding and reducing portfolio concentration.
There is also growing concern about certain terms and conditions, such as covering roofs at depreciation value rather than replacement value, and using more resilient building materials. In addition to insurance companies, state legislators (such as California) have also taken action to incentivize more defensive building materials and regulations, which may ultimately benefit insurance companies.
