Firms continue to see attractive opportunities in property cat reinsurance: TD Cowen
Despite ongoing pricing pressures, the management teams TD Cowen spoke with ahead of the January 1, 2026, renewals continue to see attractive opportunities in property catastrophe reinsurance.
According to the firm, commentary during its trip on property catastrophe reinsurance pricing for the 1/1/26 renewals was slightly more negative than during the Q3 2025 earnings season, when forecasts centred on a -10% decline.
“Given increased reinsurance capacity relative to expectations a few months ago, estimates during our trip averaged around a -15% decline at 1/1/26, with some companies forecasting -10% to -15% and others -15% to -20%,” the firm explained.
TD Cowen continued, “Most, but not all, companies have found more pricing pressure at higher layers relative to lower ones. One insurer estimated that higher layers are likely declining as much as -20% to -25%, while lower layers are seeing declines that are closer to -10%.”
Meanwhile, management at Ariel Re is said to have struck an “optimistic” tone, noting that even if pricing in the low layers the firm focuses on falls by -10%, coming off a very large increase at 1/1/23, the industry remains in a strong position.
TD Cowen added, “Management cautioned against a binary view of pricing as just ‘hard’ versus ‘soft.’ That said, others expressed the contrarian view that low layers may see more competition, as high layers already corrected last year.”
“A few companies framed likely 2026E pricing as roughly equivalent to 2022 pricing levels, though worse than 2023-2025. Still, attachment points have seemingly improved since pre-2023 levels.
“Deals for 1/1/26 renewals have been slow to bind, arguably an indication that capacity is abundant. Some estimate that ~90% of price discovery is set to take place over the next three weeks.”
At the same time, TD Cowen said that property reinsurance pricing appears particularly pressured in the cat bond and retro markets, though declining retro rates could provide an incremental benefit for reinsurers seeking retro protection.
Elsewhere, the firm said that terms and conditions, as well as retention levels, appear to be largely holding, following the significant improvement in recent years.
“That said, given the rising capital and competition in the market, there does appear to be some incremental pressure at the margins (particularly on terms and conditions). While nominal attachment points may be largely holding, they are being gradually eroded through inflation. While we expect continued incremental pressure going forward, companies appeared to frame the impact as incremental, as opposed to more material,” TD Cowen observed.
The firm went on, “Despite the pricing pressure, management teams we spoke with still see attractive opportunities in property catastrophe reinsurance, with pricing having risen from 2017 through 2025 by a cumulative ~90% in the U.S. and ~60% globally.
“As such, even if rates decline in 2026E (and potentially beyond), business is likely to remain profitable and above risk-adjusted return targets.”
The post Firms continue to see attractive opportunities in property cat reinsurance: TD Cowen appeared first on ReinsuranceNe.ws.
