Sep 4, 2026 · 23 min · 13 segments
Excess capital will continue to be the defining feature of the reinsurance market going into the January 1 renewal negotiations. But while this will inevitably have implications for pricing, it also…
David FlandroGuest
Francis ChurchillHost
yeah that's the first chart in the report actually you can see it here i'm holding it up i know that i know we're not on tv but i'll i'll just talk you through this chart and you can see here this this is showing you the economic value added spread superimposed with reinsurance property catastrophe risk adjusted pricing at mid-year.
And what it shows and what we're trying to show, what we're trying to measure here is what is that margin above financing costs for reinsurers.
We've had some fairly big rate decreases at mid-year and we We anticipate that that will continue, ceteris paribus, if nothing else changes.
But the interesting thing about it is that if you look at return on invested capital minus weighted average cost of capital, we're pretty close to even.
So that's quite different to what we've seen over the last three years, where reinsurers created extraordinary economic value in 2023, 24, and 25, especially the Bermudians, actually.
This is the period in the market cycle where the wheat gets separated from the chaff, if you will.
And even when it does that, reinsurers can continue to hit their accounting KPIs without much problem.
But what happens generally is that relative share price performance as measured by price to tangible book usually goes down when that economic value added spread goes negative.
Buyers need to take advantage of it and reinsurers now need to underwrite a little more carefully, probably going into this part of the cycle.
yeah that's the first chart in the report actually you can see it here i'm holding it up i know that i know we're not on tv but i'll i'll just talk you through this chart and you can see here this this is showing you the economic value added spread superimposed with reinsurance property catastrophe risk adjusted pricing at mid-year.
And what it shows and what we're trying to show, what we're trying to measure here is what is that margin above financing costs for reinsurers.
We've had some fairly big rate decreases at mid-year and we We anticipate that that will continue, ceteris paribus, if nothing else changes.
But the interesting thing about it is that if you look at return on invested capital minus weighted average cost of capital, we're pretty close to even.
So that's quite different to what we've seen over the last three years, where reinsurers created extraordinary economic value in 2023, 24, and 25, especially the Bermudians, actually.
This is the period in the market cycle where the wheat gets separated from the chaff, if you will.
And even when it does that, reinsurers can continue to hit their accounting KPIs without much problem.
But what happens generally is that relative share price performance as measured by price to tangible book usually goes down when that economic value added spread goes negative.
Buyers need to take advantage of it and reinsurers now need to underwrite a little more carefully, probably going into this part of the cycle.
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