Property cat rates to remain adequate, but less profitable in peak zones & perils in 2026: Mizuho Americas

According to equity analysts from Mizuho Americas, property catastrophe reinsurance rates are expected to remain adequate but less profitable in 2026 across peak zones and perils, while reinsurers are projected to deliver strong returns in 2025, aided by retained earnings growth and increasing ILS participation.

The analyst team is led by Managing Director and Senior Equity Research Analyst, Yaron Kinar, who joined the organisation earlier this year from investment bank Jefferies.

Providing an outlook for 2026, analysts stated that a combination of strong reinsurer returns, growing retained earnings, and increased insurance-linked securities (ILS) appetite is expected to drive a further increase in capacity well beyond $50 billion (before capital deployment), compared with a more muted rise in demand of around $10 billion, resulting in additional pricing pressure.

The increased appetite from ILS investors is expanding the supply of third-party catastrophe risk capital, particularly through catastrophe bonds and also through other collateralized reinsurance structures.

Therefore, this deeper investor demand is enabling insurers and reinsurers to purchase a greater share of multi-year catastrophe reinsurance protection from the capital markets, as sponsors can lock in capacity at spreads that reflect diversified capital-markets investor return requirements.

Analysts also expect an even greater degree of pressure in more distant risk layers (1-in-50 PMLs or higher), as these layers have not been employed during numerous loss events that have occurred in recent years and are becoming increasingly commoditized.

“We believe that discipline will be maintained to a greater level in less-remote layers in which reinsurers are more active, as these layers were the ones that faced the greatest losses through 2022,” the analysts said.

These elements are anticipated to result in 2026 becoming the third consecutive year of pressure on property rates.

Concurrently, while reinsurers are eager to highlight that terms and conditions remain stable despite the pricing pressure, analysts noted that maintaining flat attachments since 2023 essentially constitutes further erosion, as it indicates that attachments are failing to keep pace with inflationary costs associated with rebuilding and replacement.

Nevertheless, reflecting on the mid-twenties and low-thirties property catastrophe reinsurance returns seen in 2023 to 2025, analysts affirmed that they believe that property cat rates will remain adequate albeit less profitable in 2026, at least in peak zones and peak perils.

Elsewhere, analysts expect to see a continuation of volatility in property-weighted books driven by severe weather events.

“However, compared to the past, we expect somewhat lower volatility in reinsurance underwriting margins, as reinsurers have broadly moved toward more remote risk. At the same time, we expect reinsurer underwriting margins to moderate as property CAT rates soften,” analysts said.

And lastly, Mizuho Americas forecast heightened volatility for property-weighted primary insurers as reinsurance dynamics evolve, alongside erosion in underwriting margins driven by softening conditions and mix shift.