Reinsurance prices show sharper softening than anticipated at Jan renewals: Moody’s Ratings

Despite the significant Los Angeles wildfire losses at the start of 2025, reinsurance pricing at the January 1, 2026, renewals came in softer than anticipated just months ago. According to Moody’s Ratings, the combination of those losses failing to provide price support and a benign Atlantic hurricane season led to a more pronounced softening in property catastrophe rates than earlier market sentiment suggested.

Pricing at 1/1 2026 declined significantly in property and across most specialty lines. However, according to Moody’s Ratings, this downward shift was fueled by a record supply of reinsurance capital, driven by several years of strong earnings, robust capital growth, and a landmark year for catastrophe bond issuance in 2025.

In a recent report, the agency emphasised that the losses from the California wildfires at the beginning of last year did not generate adequate support for reinsurance pricing at the recent 1/1 renewals.

Additionally, a benign Atlantic hurricane season in 2025 also played a role in property catastrophe prices coming in a bit lower than anticipated.

Globally, insured losses from natural disasters exceeded $100 billion once again in 2025. Although reinsurers absorbed a substantial portion of the losses from the Los Angeles wildfires, the prevalence of severe convective storm events during the year, which are primarily retained by primary insurers following the market reset in 2023, indicated that overall, natural catastrophe losses did not provide considerable support for reinsurance pricing.

“The recent January renewals represent an acceleration of downward pricing momentum from the highs reached two years ago. Absent a significant catastrophe loss event (or series of events), we expect reinsurance pricing to continue drifting lower in April and July, the key renewal dates for Japanese and US reinsurance contracts, respectively,” Moody’s Ratings explained.

Adding: “Although risk-adjusted returns are still attractive for reinsurers, we expect companies to return more capital to shareholders through dividends and share buybacks as expected returns from underwriting move lower over the coming months.”

In 2023, alongside pushing up rates within the property sector, reinsurers also tightened terms and conditions, shifted away from frequency covers and aggregate protections, and elevated attachment points to mitigate volatility and refocus on offering balance sheet protection instead of earnings.

At the 1/1 2026 renewals, while attachment points remained largely stable, Moody’s Ratings noted that there were signs that the competitive environment has led to some easing of the stringent terms and conditions that were enforced in 2023.

“Some cedents have reported they were able to secure coverage with lower attachment points. Reinsurers are also increasing their exposure to frequency-related coverages, such as aggregate reinsurance and second and third event coverages,” the firm added.

In September 2025, Moody’s published its reinsurance buyer survey, emphasising a significant transition towards rate reductions for property reinsurance, while opinions on casualty remain varied.

“January renewals for both casualty and property lines were moderately more favorable for cedents than their expectations in our September 2025 reinsurance buyer survey,” Moody’s Ratings noted

The firm continued: “For property coverages, 75% of respondents expected price decreases, with about half expecting price decreases of 5% or more. For casualty reinsurance, a solid majority of buyers expected premium rates to remain stable or increase by up to 5%.

“Overall, reinsurance prices came in a bit lower than expectations as the losses arising from the California wildfires did not create significant support for reinsurance pricing and losses from hurricane season were low.”

Moody’s September survey also indicated that catastrophe bonds and collateralized reinsurance were the most attractive forms of alternative capital heading into 2026.

Given that 2025 set a new record for catastrophe bond issuance, it is very likely that a high number of new sponsors will venture into the market throughout 2026 as interest in the space continues to grow further.

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