Property catastrophe reinsurance rates may fall 10% at January 2027 renewals

Property catastrophe reinsurance rates are expected to decline further at January 1, 2027 renewals, while improvements in catastrophe modelling technology are giving insurers and reinsurers easier access to alternative assessments of natural disaster risk.

Insurance investment bank KBW forecasts rate reductions of at least 10% for property catastrophe excess-of-loss reinsurance. The expected decline follows substantial price reductions during the January and mid-year 2026 renewal periods.

• KBW expects property catastrophe excess-of-loss reinsurance rates to decline by at least 10% at January 1, 2027 renewals, following reductions of 12% and 16% during the 2026 renewal cycles.
• Moody’s and Verisk have expanded support for catastrophe models developed using the open-source Oasis Loss Modelling Framework, making independent model comparisons easier.
• Property catastrophe bond issuance under Rule 144A reached a first-half record of $17.3 bn in 2026, according to AM Best, adding competitive pressure to traditional reinsurance pricing.

At the same time, increased availability of catastrophe models built on open-source technology is allowing insurers and reinsurers to compare vendor estimates with alternative risk assessments.

Changes introduced by Moody’s and Verisk have reduced technical barriers to deploying independent models.

Property and casualty reinsurance net premiums written declined 6% to $73.73 bn in the first half of 2026, although underwriting profitability improved significantly as catastrophe losses fell, according to Fitch Ratings.

Lower catastrophe losses accounted for much of the underwriting improvement. Catastrophe events added 3.5 percentage points to the combined ratio, down from 10.9 percentage points a year earlier.

Global reinsurance market conditions remain difficult as abundant capacity and strong competition pressure pricing across most lines, according to Fitch Ratings. Non-life underwriting results improved sharply in the first half of the year.

Property catastrophe reinsurance rates face further reductions in 2027

KBW expects property catastrophe excess-of-loss reinsurance rates to fall by at least 10% at January 2027 renewals.

Excess-of-loss reinsurance provides protection when catastrophe losses exceed a specified retention threshold, helping insurers limit their exposure to large events.

The anticipated reductions would extend the softening already recorded during 2026.

Property catastrophe reinsurance rate changes

Renewal period	Rate change
January 1, 2026	-12%
Mid-year 2026	-16%
January 1, 2027	-10%

KBW expects the January 2027 reductions to be smaller than those recorded during the previous two renewal periods.

However, the investment bank cautioned that actual renewal pricing has historically been less favorable to reinsurers than preliminary expectations established during September’s Rendez-Vous de Septembre meetings in Monte Carlo.

Competition from traditional reinsurance capacity and insurance-linked securities continues to put downward pressure on rates.

Catastrophe bonds add pressure to traditional reinsurance pricing

The catastrophe bond market has become an increasingly important source of alternative risk transfer capacity.

According to AM Best, issuance of Rule 144A property catastrophe bonds reached $17.3 bn during the first half of 2026, setting a new first-half record. These securities allow insurers and reinsurers to transfer specified catastrophe risks to institutional investors.

Growing issuance provides additional capacity outside the traditional reinsurance market and increases competition for property catastrophe business.

The expansion of catastrophe bond capacity comes as reinsurers prepare for further pricing reductions during the January renewal season.

Moody’s and Verisk expand access to alternative catastrophe models

Developments in catastrophe modelling are also changing how reinsurers assess and price catastrophe exposures.

Over the past two years, Moody’s and Verisk have opened their modelling platforms to catastrophe models developed using the Oasis Loss Modelling Framework.

Oasis provides an open-source framework that allows independent developers to build and deploy catastrophe risk models.

Models using the framework can now be accessed through Moody’s Intelligent Risk Platform and Verisk’s newer modelling platform. The changes have made alternative models easier to deploy, reducing some of the barriers that previously limited their use.

For insurers and reinsurers, this creates opportunities to compare their primary catastrophe model with independent risk assessments without maintaining entirely separate modelling environments.

Most reinsurers continue to rely on one primary catastrophe model

Despite the growing availability of alternative models, most insurers and reinsurers continue to use one primary model for core risk decisions.

Approximately 90% of firms rely on a principal catastrophe model for pricing, risk assessment and determining risk appetite. Additional models are generally used to challenge or validate the main model’s results.

These alternative assessments may be developed internally or obtained from reinsurance brokers and specialist consultants.

Regulators and rating agencies generally favor consistency between the models used for insurance pricing, risk management and reinsurance purchasing. Using different primary models for related decisions could produce inconsistent assessments of the same exposure.

The approach is particularly relevant for major catastrophe perils, although modelling practices may differ for smaller or less extensively studied risks.

Reinsurers adjust catastrophe model outputs to develop their own risk assessments

Catastrophe models provide estimates rather than definitive measurements of future losses.

Reinsurers therefore adjust vendor outputs to reflect their own assumptions about catastrophe frequency, severity and insured exposure.

These adjustments can include:

• Event frequency: Changing assumptions about how often simulated catastrophes may occur.
• Event sets: Using different collections of simulated hurricanes, earthquakes or other natural disasters.
• Loss adjustment expenses: Allowing for costs associated with investigating and settling claims.
• Unmodelled exposures: Adding allowances for risks not fully captured by standard catastrophe models.
• Climate conditions: Adjusting assumptions to reflect changing environmental and weather patterns.
• Market conditions: Considering how underwriting practices and the reinsurance cycle affect risk selection and pricing.

Catastrophe modelling produces a range of possible outcomes rather than a single correct loss estimate.

The availability of independent models gives reinsurers additional ways to evaluate that range and examine differences between modelling assumptions.

January 2027 renewals combine lower pricing with broader modelling choices

The January renewal season will test how reinsurers balance falling rates with their assessments of catastrophe exposure.

Traditional reinsurance capacity and record catastrophe bond issuance continue to increase competition, while improvements in modelling platforms make independent risk comparisons more accessible.

For reinsurers, alternative models can provide additional evidence when assessing whether proposed pricing adequately reflects portfolio risk. However, greater model availability does not eliminate uncertainty surrounding catastrophe frequency, severity or future insured losses.

The combination of softer pricing and more accessible risk analytics places greater importance on how reinsurers interpret model results and apply them to underwriting decisions.