Reinsurer returns hold up as property-cat pricing slides

Bermuda's reinsurers are the first to feel the price slide, but they are still clearing the bar. The current property-cat softening has yet to turn into value destruction. Global reinsurers have now met their cost of capital for a third consecutive year, according to AM Best's new global reinsurance segment report. The ratings agency puts the industry's weighted average cost of capital at 8.23% for 2025. That is up from 7.67% a year earlier. It stood at 8.63% in the first quarter of 2026.

The price pressure is steep. AM Best cites Guy Carpenter figures on the January renewals. Property-cat rate-on-line fell 12% there. It fell another 16% at the June and July renewals. That is the steepest midyear decline in decades, larger than anything the soft market of the 2010s produced. Capacity has grown and competition has followed. Even so, rates remain almost 40% above 2017, before the market's most recent hardening cycle began.

The report credits tighter policy terms, higher attachment points and reduced risk exposure — the underwriting discipline built up over years of rate increases — for keeping returns above the cost of capital. Median return on equity among reinsurers was 16.34% in 2025, just below the record set in 2023. Investment income is doing its part, and AM Best expects relatively high yields to persist for several years.

That discipline shows up in the loss numbers. Global insured natural-catastrophe losses again crossed $100 billion. Severe convective storms accounted for more than $50 billion of that. Programme structures kept much of that impact with primary insurers, AM Best said. The report reminds Bermuda, a centre for both property-cat reinsurance and insurance-linked securities, that attachment points and terms decide where losses land. How much further price can fall before structure stops being enough is unclear.