Guy Carpenter sees buyer’s market as reinsurers head to Monte Carlo

The reinsurance sector is entering this year’s Monte Carlo rendezvous with signs of accelerating softening and a strong buyer’s market, according to senior executives at Guy Carpenter.

Laurent Rousseau, CEO for Europe, India, Middle East and Africa and CEO for global capital solutions, said the backdrop to the 1 January 2026 renewals would be shaped by volatility in the macro environment, but also by an “acceleration of the softening trends witnessed over the past two years”.

“The reinsurance industry is clearly and increasingly in a buyer’s market,” Rousseau said. “It is likely that price decreases will accelerate and terms and conditions will broaden, but in an orderly manner, as reinsurers push for growth.”

He added that strong underwriting results, retained earnings and higher investment yields had boosted traditional capital, while alternative investors were becoming more active.

“Alternative capital has not yet reached its full capacity and will be likely growing,” he said. “The current environment is marked by a greater contribution of investment income to capital providers’ overall return.”

Strong profits but relevance question

Jayan Dhru, the broker’s New York practice leader, said reinsurance had proved resilient despite a complex geopolitical and economic backdrop.

“Reinsurance is historically considered a defensive sector, because the demand for risk transfer remains relatively constant even during economic downturns,” Dhru said. “This stability translates into more predictable earnings and the ability to deliver consistent dividends.”

Capital in the sector is expected to reach around $650bn this year, up from $530bn in 2022. “The industry’s combined ratio was below 90% in both 2023 and 2024 and is forecasted to remain below 90% through 2027, indicating efficient risk management and underwriting discipline,” Dhru said.

Returns have rebounded strongly since the 2023 “reinsurance reset”, but Dhru also warned that reinsurers risked ceding relevance if they continued to take on less of the catastrophe burden.

“Reinsurers now have the ability to absorb an estimated $250bn in total catastrophe-related insured losses without depleting capital,” he said.

“However, reinsurers’ share of natural catastrophe losses declined to 12% in 2024 from 20% in 2022. They must strike a balance between maximising profitability and maintaining their role as reliable long-term partners.”

Property moderation, casualty pressures

Turning to property, David Duffy, president of global clients, said the sector had shown resilience after the Los Angeles wildfires earlier this year.

“Risk-adjusted pricing has moderated during 2025 with pronounced reductions seen in more remote layers,” he said. “Competition for share allocations on client programmes has helped produce more consistency in negotiated coverage across reinsurer panels.”

He said Guy Carpenter expected property renewals in 2026 to follow 2025 patterns. “We project returns on capital allocated to property reinsurance lines will exceed reinsurers’ cost of capital, resulting in increased appetite for property risk,” Duffy said. “Clients with good loss experience can expect risk-adjusted rate reductions.”

Casualty markets are meanwhile characterised by ample capacity and evolving exposures, according to Carolyn Morley, managing director for global casualty.

“The market remains attentive to ongoing economic and geopolitical uncertainties, and continues to monitor developments such as nuclear verdicts, social sentiment, adverse claim trends and emerging risks,” Morley said.

She noted that inflation and litigation dynamics were particularly acute in the US. “Social inflation and litigation trends are influenced by factors such as social sentiment and an anti-large corporation culture,” she said. “This is further amplified by third-party litigation funding, resulting in higher claims severities and longer litigation durations.”

Reinsurers were responding selectively, added Morley.

“We fully anticipate that our clients will expect reinsurers to respond with capacity and terms and conditions that reflect the current portfolio,” she said. “Clients retain much more risk than reinsurers accept and are just as motivated to counter the social inflation dynamic.”

Looking to RVS 2025, Rousseau said reinsurers had to decide whether to act as “passive capacity providers” or “active capital allocators” in a volatile world.

“There is room today for strategies to create a sustainable and mutually beneficial market environment,” he said.

“Opportunities exist for reinsurers to partner with cedents to address volatility and frequency issues. Appropriately structured reinsurance, addressing these concerns, is likely to become more prevalent in the market as reinsurers seek to address them,” Rousseau added.