J.P. Morgan just threw cold water on the reinsurance sector’s outlook. The bank expects strong results in the near term, but labels the business “structurally inferior” to personal and commercial lines over the long run. Its analysts point to January 1, 2026 renewals as the next flashpoint for sharper price declines.
The firm’s latest report cites the 2025 renewal season as a signpost.
Property catastrophe rates dropped 5–15% in January, with lower layers holding up better and loss-removed exposures hit harder.
According to the bank, absent any major catastrophe activity in the months ahead, the 1/1/26 renewals will see an even steeper fall.
Analysts expect reinsurers to post solid Q3 2025 earnings, supported by light catastrophe activity. Yet the bank insists the structural problems don’t disappear.
Most insurance segments already look commoditised, but reinsurance stands out for how little differentiation exists compared to primary commercial or personal markets, where underwriters can lean on distribution, brand, or service to defend pricing.
Capacity keeps rising. Hurricanes Helene and Milton, alongside the Los Angeles wildfires, didn’t slow down new entrants or alternative capital.
J.P. Morgan describes the market as “soft” already, with competition at the higher layers of risk towers coming from catastrophe bonds and other nontraditional capacity.
That squeeze has made price reductions in upper layers more severe than in the lower sections, where underwriting discipline still carries some weight.
Margins remain positive, the bank argues, because terms and structures haven’t shifted as much as rates. Primary insurers continue to shoulder more attritional losses than reinsurers, especially compared to the pre-2023 cycle.
That buffer has allowed returns to hold steady even as headline pricing erodes.
Still, the outlook darkens into 2026. J.P. Morgan forecasts reinsurers’ ROEs will slip next year, though they should stay in the double digits—better than in previous soft markets.
The catch: strong Q3 2025 margins and book value growth could ironically fuel the next wave of price competition. According to the bank’s note, the very resilience reinsurers are banking on might speed up the decline they’re trying to avoid.
