The P&C reinsurance cycle is “very much” continuing the softening trends that began in 2023, said Guy Carpenter’s Laurent Rousseau, with the reinsurance broker also forecasting increased demand for frequency cat protection.
Guy Carpenter logo is seen in this illustration taken February 3, 2025. REUTERS/Dado Ruvic/Illustration
“Since then, reinsurance capital supply has been growing faster than demand for reinsurance. In view of this context and the current reinsurance landscape, the question is how far and how fast the market will soften in the 2026 renewal,” Rousseau, CEO of EMEA and global capital solutions at Guy Carpenter, said at a media briefing on Wednesday.
“Our current view is that the likeliest scenario is continued softening in the market. In particular, it is likely that price decreases will accelerate and terms and conditions will broaden, but in an orderly manner.”
Rousseau noted that traditional reinsurance capital continues to grow at pace, bolstered by strong underwriting results and retained earnings, while alternative capital continues to grow steadily.
“Financial investors have played an increasingly growing role in the P&C (re)insurance industries, regardless of rate evolution over the past 20 years. This shows that alternative capital has not yet reached its full capacity and will likely be growing,” he said.
While overall reinsurance demand is increasing, this is at a slower pace than capital supply owing to the “dampening effect” of insurers’ increased retentions in order to fuel earnings growth, he added.
“Increased retentions have already translated into increased volatility,” Rousseau said. “This is the normal course of business we’ve seen in past cycles, and we should be expecting to see that continue, requiring insurers to have scale and diversification to absorb increased volatility.”
Rousseau also forecast increased M&A activity.
“The M&A spree has already been active in the insurance broking industry and will likely extend to risk carriers,” he said. “As pricing tailwinds slow down, inorganic deals are likely to provide growth opportunities to insurers and reinsurers alike.”
FREQUENCY CAT COVER
In the property cat market, David Duffy, president, global clients at Guy Carpenter, indicated that the 2026 renewals season is expected to see increased demand for frequency cat protection.
While catastrophe retentions have remained generally consistent with 2024 levels in currency terms, Duffy said that inflation and underlying property values have resulted in an increase in the probability of attaching most catastrophe programs.
The moderation of risk-adjusted pricing during 2025 has seen pronounced reductions seen in more risk-remote layers, with Duffy adding that competition for share allocations on client programs has helped to produce more consistency in negotiated contract coverage across reinsurer panels.
“Subject to normal loss activity for the balance of the year, we currently expect the property reinsurance market in 2026 to continue to be guided by the trends observed in 2025,” he said.
“We project returns on capital allocated to property reinsurance lines will exceed reinsurers’ cost of capital, resulting in increased appetite for property risk on the part of reinsurers and risk-adjusted rate reductions for clients with good loss experience,” Rousseau added.
Duffy said that absorbing the financial volatility associated with the frequency and severity of cat losses continues to be a “primary challenge”, adding: “During 2025, we saw a growing willingness on the part of reinsurers to provide frequency cat protection to insurers to meet this challenge.”
“In 2026, we expect to see increased demand from insurers for coverage to protect earnings against cat frequency. Reinsurers’ ability to meet client coverage needs in this area will be an important differentiator for reinsurers seeking to grow in a competitive market environment.”