Brokers report selective reinsurer appetite despite mid‑teens ROE forecasts, shifting ceded structures at primary carriers

Brokers report selective reinsurer appetite despite mid‑teens ROE forecasts, shifting ceded structures at primary carriers

Who: Global reinsurance brokers including Guy Carpenter and Howden Re, rating agencies and major insurers; What: an accelerated softening of reinsurance pricing at the January 1, 2026 renewal season even as many reinsurers continue to show or forecast mid‑teens returns on equity (ROE); When: centered on the January 1, 2026 renewals and market data through early February 2026; Where: global reinsurance markets, with pronounced moves in U.S., European and retrocession layers; Why: abundant capital — both traditional and insurance‑linked securities (ILS) — a relatively benign 2025 catastrophe season and strong retained earnings have expanded supply, creating buyer leverage while reinsurers remain disciplined and selective about the business they will write. (insurancejournal.com)

Market snapshot and the brokers’ read: softening on price, selective demand for risk
Global reinsurance brokers reported significant, risk‑adjusted price reductions across many lines at the January 1, 2026 renewals, but they stressed that reinsurers are deploying capital selectively rather than indiscriminately chasing volume. Guy Carpenter described the cycle as one of “accelerated softening,” noting double‑digit declines in property catastrophe rate‑on‑line (ROL) indices and pointing to a large build‑up of dedicated reinsurance capital that increased competitive tension at the renewals. The broker estimated reinsurer ROE at roughly 17.6% for 2025 and said dedicated reinsurance capital rose about 9% in 2025. (insurancejournal.com)

Howden Re’s renewal analysis put the magnitude of decline in sharper relief, reporting that global property catastrophe pricing fell about 14.7% and retrocession pricing about 16.5% at 1/1, with direct and facultative placements down even more in some pockets. Howden and other brokers said outcomes varied widely depending on attachment points, program structure, loss history and the reinsurer’s strategic priorities — a pattern the market described as “softening but rational.” (artemis.bm)

Why prices fell: capital, benign loss experience and ILS
Brokers and ratings agencies pointed to three mutually reinforcing drivers of the reinsurance softening.

• Capital growth: Traditional reinsurers produced strong retained earnings in 2024–25 and alternative capital — catastrophe bonds, sidecars and collateralized reinsurance — grew rapidly. Guy Carpenter and other market trackers placed total dedicated reinsurance capital at record levels into 2025, with catastrophe bond issuance and ILS inflows particularly strong. (artemis.bm)

• Benign reinsured loss share: Although insured catastrophe losses in 2025 were high in absolute dollars, reinsurers’ share of those losses was relatively low because cedants had raised attachment points and revised structures in prior years. That reduced the immediate capital drawdown on reinsurers and removed the price support that large reinsurer losses often provide. Guy Carpenter estimated reinsurers’ share of industry catastrophe losses in 2025 at about 11%, versus roughly 20% in earlier eras. (insurancejournal.com)

• Alternative capital and ILS appetite: Investor demand for ILS remained strong after record issuance in 2023–25 and managers continued to allocate to cat bonds and collateralized reinsurance. Insurers and cedants tapped the capital markets for aggregate and indemnity protection, expanding options for buyers and pressuring rates in traditional reinsurer markets. (artemis.bm)

Reinsurers’ mid‑teens ROE reality — and why appetite looks selective
A central puzzle for cedents and brokers is that many reinsurers either posted high ROEs in recent years or continue to model mid‑teens ROE as their cross‑cycle targets — yet brokers say reinsurer appetite for certain business remains narrowly defined. The apparent tension reflects three dynamics.

First, elevated ROEs in 2023–25 — driven by a combination of underwriting discipline in earlier hard markets, reserve releases, and improved investment yields — have strengthened insurer balance sheets and attracted further capital, which in turn pressures rates. Guy Carpenter and rating agencies placed reinsurer ROEs in the mid‑ to high‑teens for 2024–25. Those high ROEs have financed growth and shareholder distributions while enlarging capacity. (insurancejournal.com)

Second, insurers’ publicly stated “mid‑teens” ROE targets are typically cross‑cycle goals, not annual guarantees. Executives repeatedly say mid‑teens are the level they seek over time while reserving the right to prioritize underwriting discipline and capital preservation in the face of adverse loss experience. Travelers’ investor materials, for example, state the company aspires over time to achieve mid‑teens returns while recognizing year‑to‑year volatility from catastrophes and reserve development. Several reinsurers and smaller start‑ups make similar statements in investor presentations and trading updates. (sec.gov)

Third, “selective appetite” reflects portfolio and capital allocation choices. Many reinsurers say they will defend margins by choosing advantaged lines, programs with transparent data, favorable attachment points and acceptable accumulation profiles rather than competing on price for every piece of business. That withholding of appetite for marginal business helps explain why cedents enjoyed steep price reductions but still saw reinsurer offers that carved out certain perils, retained tighter terms, or demanded higher retentions. As Howden put it, the market is “softening but still rational,” with capital “selectively deployed” rather than fully indiscriminate. (artemis.bm)

Shifts in ceded structures at primary carriers: quota shares, aggregates and the capital markets
Primary insurers responded to softer reinsurance pricing in different ways. Many cedents sought to reconfigure ceded structures to lock in cheaper protection while managing the volatility of loss experience.

Aggregate covers and catastrophe quota shares returned as meaningful components of renewal conversations, brokers reported. Insurers renewed or expanded aggregate protections, and a growing number of cedants used catastrophe bonds and capital‑markets structures to buy indemnity or aggregate protection for higher attachment points. Guy Carpenter and Howden noted that cedents sought improved risk‑sharing (for example, catastrophe quota shares and aggregates) alongside lower headline pricing. (insurancejournal.com)

A concrete example is TD Insurance’s return to the catastrophe bond market in late 2025/early 2026. TD sponsored a multi‑year aggregate cat bond offering (MMIFS Re Series 2026‑1) to purchase annual aggregate and indemnity reinsurance protection for Canadian perils; the deal landed in January 2026 after pricing adjustments and investor feedback. TD’s management said the capital‑markets cover helps the company manage rising catastrophe costs and keep client pricing competitive. The deal illustrates how primary carriers are supplementing treaty placements with ILS to reshape ceded structures. (artemis.bm)

Brokers also flagged renewed appetite for sidecars and collateralized retrocession as ways for cedents to access capacity while aligning risk with investors. Guy Carpenter reported more sidecar activity and broader ILS issuance in 2025, which amplified supply — particularly for layers of risk that cedents found difficult or expensive to secure from traditional reinsurers. (artemis.bm)

What this means for primary insurers
Short‑term: cedents benefited from lower headline pricing and wider structural options at the January renewals. Several brokers said non‑loss‑affected property catastrophe programs saw double‑digit risk‑adjusted rate reductions, and cedents used savings to expand limits, buy broader aggregate protections, or invest in growth initiatives. Howden described 1/1 as a “buyers’ market” in property. (carriermanagement.com)

Medium term: primary carriers face tradeoffs. Lower reinsurance spend can improve underwriting margins and free capital for expansion, but it also reduces the price signal that historically disciplined underwriting. If insurers use cheaper reinsurance to grow in ways that increase net exposure, their future volatility may rise; conversely, if cedents use savings to buy structural protections (aggregates, quota shares, cat bonds), they can lock in resilience while lowering costs. Brokers reported that the smartest renewals coupled price savings with structural innovation rather than simply trading capacity for lower cost. (artemis.bm)

What this means for reinsurers and investors
Reinsurers that retain discipline can still generate attractive returns; the challenge now is where to put the excess capital. Several reinsurers indicated they would be selective — preferring to write business that fits their modelling, accumulation tolerances and risk appetite — or to deploy capital through share buybacks, M&A or through alternative product structures. Ratings agencies and analysts warn that if softening deepens without a depletion event, underwriting margins could compress and ROE forecasts could fall toward the mid‑teens. Fitch and Moody’s both noted that the 1/1 renewals signaled lower but still robust reinsurer profitability for 2026 while highlighting the role of excess capital in driving price moves. (artemis.bm)

Quotes from the market
“Excess capital positions, profitable underwriting results, and property reinsurance rates all drove reinsurers’ appetite for growth,” Dean Klisura, president and CEO of Guy Carpenter, said in the broker’s January renewal commentary. He added that clients benefited from lower prices and a wider range of innovative solutions. (insurancejournal.com)

“Howden Re’s 1 January analysis shows pricing momentum has turned decisively,” Tim Ronda, CEO of Howden Re, told clients, adding that the best outcomes required “holistic, data‑led programme solutions that balanced pricing, structure and risk transfer across portfolios.” (artemis.bm)

“Protecting our clients in their moments of need is a responsibility we take very seriously,” James Russell, president and CEO of TD Insurance, said after pricing its 2026 aggregate cat bond — underlining why primary insurers are willing to pay capital‑market spreads to secure bespoke, aggregated protection. (artemis.bm)

Ratings agencies’ caution and the path forward
Credit analysts stressed that robust ROEs in 2024–25 do not immunize the sector against a protracted softening. Fitch and Moody’s noted that record capital and benign reinsured loss shares removed much of the near‑term price support from losses and said they expected reinsurer profitability to moderate but remain above cost of capital in 2026 — assuming normal catastrophe experience. They also warned that mid‑year and mid‑cycle renewals will be critical tests: if adverse losses re‑emerge, capital could be reallocated and pricing could tighten again. (artemis.bm)

Signs to watch at the next turning points
Analysts and brokers told clients to watch several variables that will determine whether softening stabilizes or deepens:

• Reinsured loss experience in peak perils (Atlantic hurricanes, European wind, U.S. convective storms and western North America wildfire seasons). A meaningful loss year would quickly change the supply–demand calculus. (insurancejournal.com)

• ILS investor behaviour and cat‑bond spreads. If ILS investors materially widen spreads or tighten on aggregate triggers, alternative capacity could ebb, removing a key pillar of supply. Artemis and Guy Carpenter tracked record ILS issuance in 2025; investors’ ongoing appetite is a hinge point. (artemis.bm)

• Reinsurer capital deployment choices: greater M&A, buybacks or pursuit of higher‑return specialty portfolios would absorb capital without pressuring rates; a broad scramble for premium would. (beyondspx.com)

• Primary carriers’ structural choices: whether cedents use price savings to reduce net exposure or to grow risk volumes. Brokers counsel disciplined use of savings to buy protective structures or shore up capital rather than to chase volume at the margin. (artemis.bm)

Bottom line
The January 1, 2026 renewals exposed a clear market pivot: abundant capital and muted reinsurer loss shares pushed reinsurance pricing lower across many property and retrocession layers, while alternative capital and ILS provided new, competitive avenues for cedents. At the same time, brokers and ratings agencies report reinsurers remain selective about new business, seeking margin‑preserving opportunities despite headline mid‑teens ROE targets or recent high reported returns. For cedents, the window has offered valuable choices: cheaper limits, alternative market solutions and structural innovations such as aggregate cat bonds and quota shares. For reinsurers and investors, the challenge is to convert plentiful capital into sustainable, underwriting‑based returns without reigniting a race to the bottom — a balancing act that the market will test again at mid‑year and beyond. (insurancejournal.com)

Sources: Guy Carpenter January 1, 2026 Reinsurance Renewal Report; Howden Re January 2026 renewal report; Artemis industry coverage of ILS and cat bond transactions; Fitch and Moody’s reinsurance commentary and market notes; company investor materials and trading updates cited above. (insurancejournal.com)