In a new report, Jefferies analysts have warned that risk-adjusted pricing is set to deteriorate further, with a benign hurricane season potentially triggering 10–15% declines.
“While reinsurers have mostly held firm on terms & conditions, there are indications of aggregate programs reemerging, though we would expect limited participation from our coverage names and very firm pricing on these programs,” Jefferies experts observed.
With this in mind, the report has suggested that risk-adjusted pricing is expected to continue to deteriorate, and that a benign hurricane season could lead to declines of 10–15%.
The analysts continued, “Loss free accounts could renew with decreases greater than 15%, but some 1/1 renewals will include accounts with CA fire losses. Decreases greater than 20% are historically unusual and have only occurred once since 1990.
“Using Guy Carpenter’s U.S. property CAT RoL index, risk-adjusted pricing could decrease another 20% at 1/1/2026 renewals and still be above 2022 levels.
“Further, large and/or public reinsurers often achieve better terms & conditions and pricing than headline reports, supporting more favorable ROEs than what industry commentary would suggest.”
Elsewhere in the report, Jefferies analysts said that property catastrophe reinsurance continues to offer an attractive opportunity for capital deployment. With retentions unchanged and terms and conditions largely stable, returns remain resilient, and pricing movements alone are having less influence on overall profitability than might typically be expected.
Discussions with management teams suggest that returns on equity remain comfortably above the cost of capital, at around 20%.
However, Jefferies said it is taking a measured stance on the sector, citing clear signs of rate softening in property catastrophe lines and ongoing uncertainty around liability reinsurance portfolios.
The analysts expect property catastrophe pricing to continue softening into the 2026 renewal cycle, as abundant capital and relatively muted catastrophe activity weigh on rate momentum.
Although first-half renewals have historically carried the bulk of property exposure, early indications suggest cedants will push for more favourable pricing and terms at the 1 January 2026 and mid-year renewals.
As a result, property catastrophe returns are expected to remain attractive but to moderate, with potential returns trending towards 20%.
Competitive pressures from the retrocession and catastrophe bond markets are also likely to reinforce downward pressure on pricing, as expanding alternative capital capacity leads to narrower catastrophe bond spreads.
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