Reinsurance prices set to decline further at Jan 1 as market softens: J.P. Morgan

While J.P. Morgan expects reinsurance results to remain strong in the near term, the bank has described the sector as “structurally inferior” to personal and commercial lines over the long term, and anticipates further price declines at the January 1 2026, renewals.

“With January 2025 renewals, property catastrophe prices declined 5-15% (down less for lower layers and more for loss-removed exposures) and, barring sizable cat activity in the next few months, we anticipate an even sharper drop with 1/1/26 renewals,” the firm said in a recent report.

J.P. Morgan continued, “We expect reinsurers to report robust results in Q3 2025, but our long-term view of the market remains downbeat.

Most segments of the insurance market are commoditised, but reinsurance is even more so than primary commercial or personal lines, where underwriters can differentiate on brand, service, distribution, and other capabilities.”

Barring outsized cat losses, the firm’s new report said that reinsurance prices should get progressively softer.

J.P. Morgan added, “Despite a series of large events such as Hurricanes Helene and Milton and the LA wildfires, capacity in the reinsurance business continues to build, and we are in the midst of a soft market.

“Although competition is more contained within upper layers thus far, there has been no change to the long-term structural challenges in the reinsurance market, including low barriers to entry anda  lack of differentiation among carriers. Hence, while reinsurers will generate robust returns periodically, we expect subdued returns over a full market cycle.”

While prices have declined, the firm’s report also suggested that reinsurance terms and structures have not changed commensurately, and margins in the business remain adequate.

“Price competition has been more acute in higher layers of risk towers, where there is more competition from alternative capacity and catastrophe bonds. In lower layers, which are more exposed to attritional losses, pricing has remained more disciplined, and exposures continue to present more of a burden to primary insurers than reinsurers compared to pre-2023,” J.P. Morgan explained.

Still, the firm said that reinsurers’ ROEs are anticipated to decline in 2026, but remain in the double-digit range, better than in previous soft markets.

“Given the light hurricane season (thus far), reinsurers are likely to report robust margins and BV growth in Q3 2025. However, this is likely to accelerate the pace of price reductions with upcoming renewals,” J.P. Morgan stated.