Cat bonds played significant price discovery role at Florida renewal: Schwebach, Gallagher Re

The catastrophe bond and insurance-linked securities (ILS) markets played a very significant role in determining price levels and driving improved terms and conditions for reinsurance buyers at the June 2026 Florida reinsurance renewals, according to Gallagher Re’s Head of North American Property, Adam Schwebach.

Speaking during the firm’s recent Atlantic Hurricane Season Outlook and Natural Catastrophe Update, Schwebach highlighted how oversubscriptions across both the ILS and traditional markets heavily influenced mid-year outcomes.

“Terms and conditions continued to improve for clients, given oversubscriptions, and both the ILS and traditional markets played a massive role in this,” Schwebach explained.

While year-on-year catastrophe bond issuance volumes saw a marginal dip, the total outstanding capacity shielding Florida carriers remains robust due to the structural nature of the asset class.

“Cat bonds played a very significant role in the price levels for this year, and that’s a market that continues to play a larger role in the overall risk transfer strategies in Florida. We are at about $4.3 billion of issuance in 2026 relative to $4.6 billion in 2025, so slightly down year on year, but the thing to remember is that a lot of this is multiyear coverage,” Schwebach noted.

“There’s a lot of capacity from 2024 and 2025 issuances that are still on the reinsurance towers for a lot of Florida carriers.”

The executive also highlighted a notable influx of first-time Florida-based sponsors entering the cat bond space this cycle, pointing specifically to new issuances from Olympus Insurance and Mangrove Property Insurance.

Gallagher Re’s Head of North American Property also emphasised how catastrophe bond pricing continued to converge with traditional reinsurance pricing, which he referred to as a positive development.

“There continues to be more and more first-time sponsors. It’s a very positive thing. In my mind, I think back about 10 years, when it was unique to see cat bonds being utilized for Florida placements. Now, I would say it’s more unique to not see them as part of an overall risk transfer strategy, and there’s always reasons for that, but cat bonds have very much become a standard practice in reinsurance coverages in the State of Florida,” he said.

Historically, catastrophe bonds have been utilised primarily to secure coverage for the highest, most remote risk tranches of reinsurance programs. However, 2026 saw a structural shift in investor appetite, with capital increasingly moving lower down the risk tower.

During the update, Schwebach revealed that roughly 20% of the limit placed by Gallagher Re this year participated directly alongside the Florida Hurricane Catastrophe Fund (FHCF), in which he described as being a “very positive sign for the ability for cat bond investors to think about slightly riskier tranches of reinsurance.”

This willingness to step into riskier layers has significantly boosted structural flexibility for primary insurers. According to data from Gallagher Re, while the 2024 renewal season saw very little cascading or sideways coverage, the landscape in 2026 is very different.

Nearly all the ILS limits being placed now feature some form of cascading structure or provide aggregate and sideways protection, a shift Schwebach hailed as a “very, very positive development in that market overall.”

“How does cat bond pricing compare with traditional? What we observed in 2026 is continued convergence in pricing. I think that’s a very positive sign, and the way I describe it is that it continues to give reinsurance buyers optionality in how they think about which market to access,” Schwebach continued.

“Both are very prevalent, both have their slightly different mechanics for whether or not they’re providing single year, multiyear, there’s LAE factors to consider. But to see the pricing start to converge, it gives reinsurance buyers the ability to look at those two markets and make different decisions, other than just which one’s cheaper. So, that’s a very positive development as well.”

Schwebach also noted that it is too early to tell what the January 1st, 2027 renewals will look like, but stated that current market activity presents an interesting and very positive trend for reinsurance buyers.

“What does this mean in terms of the overall cat pricing index? Mid-year 2026 results bring us back to pre-2023 pricing, which is positive to see. If you go further back historically, it gets closer to roughly 2010 pricing, which saw significant declines thereafter. So time will tell if this is the direction of the cycle,” Schwebach concluded.

Also read: Rule 144A cat bonds reach 80% adoption as Southeast inverts historical market norms: Gallagher Re’s Schwebach

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