Property Cat Pricing Trending Down Mid-Teens at Mid-Year Renewals: BMO Capital Markets

Key Takeaways

• Mid‑year 2026 cat reinsurance pricing down mid‑teens.
• Attachment points remain high despite falling prices.
• Reinsurers' risk‑adjusted RoE forecasted in high teens.
• Top‑layer pricing pressure exceeds that in lower layers.
• 2027 terms may ease if losses stay under $100B.

Pulse Analysis

The latest BMO Capital Markets analysis highlights a notable shift in the property catastrophe reinsurance market as 2026 mid‑year renewals see pricing dip into the mid‑teens. This decline reflects a classic soft‑market signal, yet it diverges from historical cycles because reinsurers have not lowered attachment points, the thresholds where they begin to pay claims. By maintaining higher retention levels, carriers protect their risk‑adjusted return on equity, which BMO still forecasts in the high‑teens, far above the single‑digit RoEs typical of a deep soft market. This disciplined stance underscores the industry's cautious optimism amid lingering exposure to secondary perils such as severe convective storms and wildfires.

Pricing pressure is not uniform across the reinsurance tower. Upper layers—often the most expensive excess‑of‑loss treaties—are experiencing sharper premium reductions, while lower layers closer to the underlying risk see only modest declines. This tiered compression suggests that cedants may find more bargaining power on the most costly coverages, but still face relatively firm terms for primary risk layers. The resilience of terms and conditions at the June 1 renewals further indicates that market participants are prioritizing pricing over contract liberalization, a stance reinforced by steady retention levels among cedants.

Looking ahead, BMO anticipates that the downward pricing trajectory will persist into early 2027, provided catastrophe losses stay below the $100 billion threshold—a scenario it assigns less than a 20% probability. Should losses remain contained, the market may witness a gradual softening of terms, potentially through broader aggregate treaties, lower retentions, or expanded coverage options. Conversely, any significant loss event could reignite a hard market, tightening pricing and attachment points once again. Stakeholders—from insurers to investors—should monitor loss trends and regulatory developments, such as Florida's tort reforms, which could subtly influence pricing dynamics in the coming years.