Higher-layer property cat expected down 20% or more at Jan renewals: TD Cowen

Following a field trip to Bermuda, analysts at TD Cowen have concluded from their discussions on the island that higher-layer property catastrophe reinsurance rates could be down 20% or more at the January 2026 renewals, while attachment points are largely holding, but the renewal is seen as running late.

As per the analysts who had met with reinsurance and insurance-linked securities (ILS) market participants in Bermuda, commentary heard during its trip on property cat reinsurance pricing at 1/1/2026 renewals was incrementally worse than during the Q3 2025 earnings season, when forecasts centered on a roughly -10% decline

The firm said: “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%.”

At the same time, analysts noted that the majority, but not all, companies have found more pricing pressure at higher layers relative to lower ones, with one insurer in particular estimating that higher layers are likely declining as much as -20% to -25%, while lower layers are seeing declines that are closer to -10%.

“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,” the analysts said.

Additionally, analysts noted that property reinsurance pricing appears to be particularly pressured within the catastrophe bond and retrocession market.

However, TD Cowen explained that declining retro pricing could be an “incremental positive” for reinsurers that are looking to purchase retro protection in the near future.

Moving forward, analysts highlighted how terms and conditions, as well as retention levels, appear to be largely holding, following significant improvements that have been seen across the market 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 explained.

Despite the pricing pressure, TD Cowen affirmed that the management teams they spoke with during their trip to Bermuda, still see attractive opportunities in property catastrophe reinsurance, with rates rising from 2017 through 2025 by a cumulative ~90% in the U.S. and ~60% globally.

Therefore, even if rates do decline in 2026, and potentially beyond, business is likely to remain profitable and above risk-adjusted return targets, the analysts noted.

Analysts also heard from some organisations that being a market leader with scale was particularly important within a softening market, as these companies are able to get better access to desired placements and preferential rates or terms compared to smaller and less established reinsurers.

The ability to offer significant capacity, potentially aided by sidecars and insurance-linked securities (ILS) was also expressed as a key method to drive improved terms and conditions on placements.

Finally, the analysts also noted that the renewals seem to be running late and “slow to bind”, with some estimating that around 90% of price discovery needs to take place over the next three weeks.

The analysts note this could be a sign of abundant capacity, while it could also be indicative of a traditional reinsurance market waiting to see whether pricing will come down to the levels seen in the catastrophe bond market for these higher-layers.

Also read: Rates down 10-15% for “late” 1/1. Cat bonds down more. Floridians to benefit: Dittman and Seo.