What Happens to Property Pricing in ’27, Insurance, Reinsurance Execs Ask

Industry executives at the S&P Global Ratings 42nd Annual Insurance Conference reported that property reinsurance pricing is currently declining following a period of significant market overcorrection. While current returns remain strong, leaders expressed concern about whether the market will maintain discipline or if rates will continue to drop into 2027. This trend is a critical focus for the property insurance sector as it navigates the intersection of falling prices and rising loss costs driven by climate change and inflation.

Jim Williamson, CEO of Everest Group Ltd., noted that property pricing in both the reinsurance and primary sectors has begun to trend downward, citing mid-teens rate decreases during the June 1 Florida windstorm renewals. Williamson explained that the industry is correcting from previous sharp rate hikes that led to high profitability, which has since attracted increased competition. He questioned whether the market will establish a sustainable floor or if 'greed' will drive rates below the levels necessary to earn reasonable returns, such as a 15 percent return on equity, by 2027.

Brian Young, president of Fairfax Insurance Group, observed that the most significant property price declines are occurring in the U.S. commercial shared-and-layered market, though he noted the U.S. remains the best-priced market globally due to stable structures and retention levels. In contrast, Young highlighted Japan as having the weakest pricing and lowest retention levels, warning that reinsurers might withdraw capacity if these conditions persist. He also pointed to Europe as an area of concern, where secondary perils like flood and hail have impacted results and price adequacy remains weaker than in the U.S.

The executives emphasized the need for pricing sustainability to counter rising loss trends linked to climate change and economic inflation. Williamson highlighted that loss events in Europe are increasingly affected by climate factors, while global supply chain issues and geopolitical tensions continue to drive up material costs. He warned that if pricing and loss curves cross again, the industry could face a major dislocation requiring sudden, massive rate increases. Both leaders indicated they would be willing to 'take chips off the table' and reduce capacity if pricing falls to levels that no longer support adequate returns.