‘Murky’ outlook for reinsurance market as capital surges: Evercore ISI

Core Insights - The global reinsurance market is facing uncertainty in 2026 due to a record influx of capital leading to a significant softening in prices, prompting analysts to describe the growth outlook as "murky" [1] Market Dynamics - The reinsurance sector is experiencing a supply-demand imbalance, with property catastrophe pricing dropping by up to 20% during the January 1 renewals, as insurance buyers regain control after years of a "hard" market [2] - A 9% increase in overall reinsurance capital in 2025 has intensified pressure on property catastrophe pricing, with Guy Carpenter reporting a 12% decline in rates-on-line and other brokers noting declines between 10% and 20% for accounts unaffected by losses [3] Pricing Trends - Property catastrophe pricing has reverted to levels last seen in 2022, with a record issuance of insurance-linked securities (ILS) in 2025, increasing the outstanding cat bond limit by 23% to $58.2 billion, indicating heightened interest in reinsurance [4] - Analysts project that with pricing down 10-20% at the January 1, 2026 renewals, the market will become increasingly competitive, leading to further declines below 2022 levels [5] Financial Projections - The loosening of terms and lower pricing may negatively impact returns in 2026, with reinsurers potentially facing worse attritional loss ratios and lower than consensus earnings per share (EPS) projections [6][7] - The casualty reinsurance market has remained stable despite ongoing reserve issues, but there are indications that the January 1, 2026 renewal was more favorable for buyers, with reinsurers pressured to increase ceding commissions [8][9] Strategic Shifts - Some reinsurers, including RenaissanceRe, Everest, and W.R. Berkley Corporation, have expressed disinterest in writing casualty reinsurance at current rates, suggesting a potential shift in focus towards property placements [10] - Analysts speculate that trading casualty for property placements may become a more significant dynamic in the coming years, although uncertainty remains regarding reserving at primary insurers [11] Growth Outlook - The overall growth outlook for reinsurers is expected to worsen, leading to reduced estimates, although increased share repurchase activity is anticipated across the sector in 2026 [12]