Record reinsurance capital cuts prices for insurers

Property catastrophe renewals delivered broader protection during the June and July seasons.

Record levels of global reinsurance capital helped insurers secure lower prices and better coverage terms during the mid-year 2026 renewals.

The professional services firm said global reinsurance capital reached a record $790b as of 31 March 2026, mainly driven by continued growth in alternative capital, according to a report by Aon.

The higher level of available capital gave insurers more flexibility to buy reinsurance and manage risks.

The report found that insurers achieved double-digit price reductions and improved terms and conditions for property catastrophe reinsurance during the 1 June and 1 July renewal seasons.

Global demand for reinsurance rose by more than 10%, supported by a wider range of products from reinsurers and increased purchases by US insurers seeking additional protection at the upper layers of their programmes.

Aon said reinsurance capacity remained more than sufficient to meet higher demand, particularly in the US. 

Insurers in Latin America and Australia and New Zealand also benefited from fewer capacity constraints during renewals.

The report said reinsurers continued to offer more customised solutions, with greater willingness to provide flexible structures and products such as aggregate covers and earnings protection.

Aon said improvements in data quality, analytics and artificial intelligence have helped increase market capacity and strengthen reinsurers' confidence.

Reinsurers also continued to report strong financial performance, posting an average first-quarter return on equity of 14.1%, above the industry's average cost of equity. 

Aon said an expected strong El Niño weather pattern, which is forecast to reduce Atlantic hurricane activity in 2026, should help reinsurers remain profitable this year if loss activity stays within expectations.

The report said insurers are placing greater emphasis on managing market cycles through capital management, innovation and mergers and acquisitions. 

Many are maintaining their core retentions while considering additional protection through buy-downs and frequency covers.

According to Aon, the ongoing conflict in the Middle East did not directly affect the mid-year renewals. 

However, specialty lines such as marine, war, terrorism and political violence insurance remain exposed to geopolitical developments. 

Any changes to reinsurance terms and conditions are more likely to be reflected during the January renewal season, when most treaties are renewed.

Looking ahead to 2027, Aon said reinsurers are expected to offer greater flexibility in coverage structures and retentions if insured losses remain within expectations for the rest of the year.