Cedants are entering the January 2027 renewals with greater negotiating room as record capacity and strong reinsurer earnings increase competition across the market.
Aon executives said current capacity levels are unusually high across almost every business line, giving insurers an opportunity to reconsider program structures, retentions and the allocation of reinsurance spending.
Reinsurers remain on course for a fourth consecutive year of strong earnings, according to Aon’s Reinsurance Solutions, tracking 120 global P&C insurers. The group generated an average return on equity of 15.5% during the first half of 2026.
Market softening has already reduced reported business volumes, while comparatively low ceded losses have supported underwriting results. The comparison is particularly favorable against 2025, when California wildfires increased losses.
Earnings at this level remain comfortably above the sector’s average cost of capital. Aon expects the same relationship to continue in 2027 in the absence of unusually severe events.
Record reinsurance capacity adds further pressure on pricing and gives buyers more options over how they structure protection.
Property reinsurance remains profitable for carriers despite the softer market. Reinsurers continue to generate double-digit ROEs in property. Pricing also remains more than 30% above the index level recorded at the previous soft-market trough.
Natural catastrophe losses have been running below recent averages. The five-year annual average is around $114 bn, while insured catastrophe losses stood near $75 bn year to date at the time of Aon’s briefing.
Aon expects further savings for cedants at the January renewals, though reductions should be smaller than those recorded at January 1, 2026. She indicated property savings around 10%.
Cedants are considering how to use those savings rather than simply reducing reinsurance expenditure. Priorities include greater frequency protection, lower retentions and additional spending in other business lines.
Capacity is also entering casualty reinsurance, including growing interest from alternative capital investors through sidecars.
Investor demand for casualty exposure has become a regular part of discussions with insurers and reinsurers. Most cedants are using alternative capital alongside traditional reinsurance rather than replacing established counterparties.
Loss development remains an issue for parts of the casualty market. Insurers are also taking a conservative approach to booking more recent accident years, supporting firmer pricing even as additional capacity enters the sector.
Aon still expects strong casualty insurance rate increases through the end of 2026. Workers’ compensation remains an exception, with slight rate reductions continuing.
Reinsurers are also differentiating more sharply between insurers based on whether achieved rates remain ahead of loss trends. Pricing, exclusions and reinsurance transactions are increasingly being used to manage liability exposure.
Primary U.S. cyber pricing remains under pressure. Business outside the U.S. has produced lower volatility and faster, more favorable loss development, according to Aon.
Persistent pressure on underlying rates is creating margin concerns for insurers. Some buyers are therefore considering higher quota share cessions to transfer a larger portion of premiums and losses to reinsurers.
Systemic cyber accumulation remains harder to address through proportional treaties alone. Aon sees greater need for dedicated catastrophe and aggregate structures designed to separate correlated cyber losses.
AI adds another source of accumulation risk as adoption expands across businesses and technology infrastructure, increasing attention on how cyber programs respond to large correlated events.
