Competition in the global reinsurance market is beginning to challenge the insulation reinsurers maintained during the recent hard market, according to USI Insurance Services’ 2026 Commercial Property & Casualty Market Outlook Report. USI reports that as market conditions shift, reinsurers face growing pressure on rates, attachment points, and terms that remained firm over the past several years. An abundance of capacity is driving this change and reshaping the risk balance between reinsurers and primary insurers.
Hard Market Dynamics Begin to Shift
For several years, reinsurers benefited from a hard market that featured elevated attachment points on treaties. As a result, primary insurers absorbed a larger share of catastrophe losses, while reinsurers remained relatively insulated.
However, recent loss experience and capital flows are altering that dynamic. The first half of 2025 saw unusually high natural catastrophe losses, which exceeded an estimated $80 billion globally. Despite that early activity, the property insurance industry experienced a quiet hurricane season later in the year. Consequently, total global catastrophe losses for 2025 reached approximately $107 billion, significantly lower than earlier projections that exceeded $150 billion.
This moderation in losses supported rate improvements in the second half of the year. According to the USI report, shared placements and excess catastrophe policies recorded rate decreases of up to 35%.
Secondary Perils Re-Enter the Reinsurance Equation
USI indicates that the current competitive environment is again exposing reinsurers to catastrophe losses that insurers largely absorbed during the hard market. These losses primarily stem from secondary perils, including severe convective storms, wildfires, and floods.
As reinsurers assume greater exposure to these events, higher combined ratios are expected to reduce profitability. Even so, USI notes that the reinsurance sector remains resilient. Reinsurers continue to maintain strong balance sheets and sufficient surplus, positioning them to manage softening rates or potential increases in loss activity.
Capital Inflows Drive Market Competition
A significant driver of the evolving market conditions is the influx of capital into the reinsurance sector. According to the report, both traditional and alternative capital reached record levels by the end of 2025.
USI estimates that alternative capital totaled approximately $121 billion, accounting for roughly 19% of all dedicated reinsurance capital. This category includes insurance-linked securities, sidecars, and catastrophe bonds.
The report explains that investor interest remains strong because sector returns continue to appear attractive. Property rates remain adequate, and the quiet hurricane season supported favorable loss ratios. As a result, USI expects capital inflows to continue unless certain conditions emerge. These conditions include challenges to rate adequacy, large-scale catastrophe events that elevate combined ratios, or macroeconomic pressures that restrict available capital.
Treaty Renewals Favor Insurers
Given the overall stability of the reinsurance market, USI expects treaty renewals to remain broadly favorable for insurers. This environment has also contributed to a softer pricing outlook entering 2026.
USI projects that pricing trends observed in the second half of 2025 will largely extend into the first half of 2026, depending on risk characteristics and loss history.
For non-catastrophe property risks with minimal loss history and favorable risk profiles, rates in the second half of 2025 ranged from a 10% decrease to flat. USI expects those rates to remain within the same range during the first half of 2026.
For catastrophe-exposed properties with a minimal loss history and favorable risk profiles, rates declined by 10% to 30% in the second half of 2025. USI forecasts additional decreases for the first half of 2026, with rates expected to range from 20% to 5% down.
Meanwhile, for catastrophe and non-catastrophe property risks with unfavorable loss history or risk profiles, rates in the second half of 2025 ranged from a 15% decrease to a 5% increase. USI anticipates those rates will remain largely unchanged in the first half of 2026.
Competitive Pressures Persist Into 2026
Analysts conclude that following a low-loss year in 2025 and favorable treaty renewals, competition within the property insurance market will remain strong through the first half of 2026. Rate decreases are expected to expand among single-carrier insurers, while shared and layered placements continue to soften for high-quality risks.
This competitive environment is influencing coverage structures and purchasing strategies. According to USI, insureds now have greater opportunities to secure higher limits, broader terms, and improved deductibles.
Additionally, increased capacity enables buyers to consolidate multiple locations under a single master policy. Some buyers are also turning to parametric coverage options as a way to reduce retentions and manage risk more efficiently.
As capital levels remain high and pricing softens, USI’s outlook suggests that competitive pressures will continue to reshape the property reinsurance landscape in the near term.
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