Benign cat losses reinforce soft market conditions – Gallagher Re

Global insured natural catastrophe losses reached an estimated $46bn during the first half of 2026, leaving the re/insurance sector strongly positioned as property catastrophe pricing continues to soften, according to Gallagher Re.

The total was 28% below the ten-year average of $64bn and the lowest first-half insured loss figure since 2019.

Economic losses were estimated at $142bn, 10% below the ten-year average, while five consecutive quarters have now passed without an individual insured catastrophe event exceeding $10bn.

Steve Bowen, chief science officer at Gallagher Re, said the relatively benign period had left most catastrophe budgets largely untapped.

“It has been a number of years since we’ve had a stretch like that of relatively good luck when it comes to not seeing a really large event,” Bowen told GR.

“There has not been anything that is going to meaningfully halt the trends that we’ve most recently seen at the June 1 and July 1 renewals.

“If anything, it continues to allow the industry to put itself into even better health and prepare for when the inevitable flipping of the switch happens and the pattern shifts back to a more active phase.”

Abundant capacity, strong reinsurer earnings and below-average losses have widened the gap between reinsurance supply and demand, Gallagher Re’s “Natural Catastrophe and Climate Report” said.

Bowen said some buyers were using savings achieved at renewal to purchase additional protection, with aggregate covers returning amid the competition, after becoming prohibitively expensive during the peak of the previous hard market.

“I think the smart companies are the ones that are continuing to buy more protection,” he said.

“They’re more smartly using the savings from their reduced premiums to firm up other parts of their portfolio that may have been more exposed previously.

“When it comes to natural catastrophes, there’s no question that we’re not going to stay in this quiet period forever. There are always going to be swings in volatility, and it could come back really quickly,” Bowen said.

El Niño shift

El Niño conditions officially emerged during June and are forecast to peak during November or December as potentially one of the strongest phases in the modern record.

The phenomenon is expected to suppress Atlantic hurricane activity, although Gallagher Re warned it shifts catastrophe risk rather than eliminating it.

“It doesn’t mean the risk is zero unless there are zero storms,” Bowen said.

“If you have fewer storms, there is obviously less probability of one of those coming ashore. For right now, it certainly looks like it could be quiet.”

However, Western Pacific activity has already been above average, with El Niño potentially pushing storms further north towards China, the Korean Peninsula and Japan.

Bowen also warned a strong El Niño could enhance drought and wildfire conditions in some regions while intensifying monsoon rainfall and flooding elsewhere.

EQ “sleeping giant”

The $37bn economic loss from Venezuela’s June earthquake sequence provided a reminder of the potentially severe protection gap surrounding seismic risk, with insured losses estimated at approximately $1bn.

“Earthquake is always the sleeping giant,” Bowen said, referencing declining insured values for peak California quake risk.

“It has been a really long time since we’ve had a very meaningful industry impact from that peril, but it is not something that we can predict.

“Just because it has been a long time since we’ve had one does not necessarily mean that the risk doesn’t exist.”

Bowen said earthquake insurance take-up had fallen to 10% or below across many Californian counties, creating the potential for substantial uninsured losses from a major event.

He also highlighted the interaction between extreme heat, data centre development and ageing electricity infrastructure.

“There have been historic levels of strain on utility grids because of all these data centres coming online, combined with record heat,” Bowen said.

“The risk of blackout has domino-effect implications for business interruption and contingent business interruption, and outside the property lens there are implications for life and health and casualty.

“There are a lot of unknowns at this point, but it is certainly a very fast-moving sector,” he added.