A two-speed January renewal as political violence losses outrun premium

Noise and signal

The noise runs like this: reinsurance is getting cheaper in every line, so the 1 January 2027 renewal will shrink corporate insurance bills across the board. In Moody's buyer survey, 86% of respondents expect property reinsurance prices to fall again in 2027, most likely by 7.5–15%. A year earlier, 74% gave the same answer.

The signal is that the softening is confined to the modelled catastrophe layer. On 10 September Willis Re put global political violence and terrorism premium at about $1.5 billion, against Hormuz-related loss estimates that have climbed to $3 billion. A line running a loss ratio close to 200% does not get cheaper. On 1 January it will price separately from cat, and in the opposite direction.

Strong balance sheets, shrinking volume

On 23 October Munich Re reported preliminary third-quarter net profit of about €1.7 billion and raised its 2026 target from €6.3 billion to €6.6 billion. Nine-month profit reached €5.7 billion, so roughly €0.9 billion in the fourth quarter is enough to hit the target. Final quarterly figures are due on 12 November.

The same group shrank the volume it wrote at the July renewal by 9.1%, while risk-adjusted pricing fell 5.5%. In August it cut its reinsurance revenue target from €40 billion to €38 billion. Board member Stefan Golling said in September that further softening on 1 January was likely if catastrophe losses stayed moderate until year-end.

SCOR reported quarterly net income of €206 million on 30 October, down 4.8%. Its P&C combined ratio (claims and expenses as a share of premium) deteriorated by 3.2 points to 84.1%, still below its 87% target. The group's Solvency ratio stands at 221%, and its reinvestment yield reached 5% on 30 September, up from 4.3% at the end of June.

Hannover Re reported nine-month net income of €2.1 billion on 9 November, up 6.9%; net investment income rose 40.4% to €1.9 billion. Gross P&C revenue, by contrast, shrank 4.9% to €13.2 billion, and the contractual service margin on new business fell 11.9%. In the second quarter the company had set aside about €200 million for the possible impact of the Iran war.

Hannover Re board member Sven Althoff said the same day that the group would place very similar retrocession structures (the cover a reinsurer buys to pass on its own risk) for 2027. Its retro protection had risen 17% to €1.4 billion on 1 January 2026. The picture shows profit migrating from the underwriting line to the investment line: even as prices fall, balance sheets fed by higher rates keep capacity in the market.

Cat pricing falls for a second year

SCOR executive Jean-Paul Conoscente said on 30 October that catastrophe pricing in the handful of European countries already quoted was down by high single to low double digits. The renewal is running late; at the end of October many programmes had yet to be sent to reinsurers.

Guy Carpenter's global property catastrophe rate-on-line index fell 16% in 2026. Gallagher Re reckons the market needs $50–75 billion of catastrophe losses in the second half to cover its cost of capital. Add accumulated excess capital and that threshold approaches $150 billion; a single mid-sized storm will not halt the softening.

War and marine move the other way

In the same call Conoscente confirmed marked price increases in loss-hit lines such as marine, energy and war. On 22 September IUMI said the Gulf conflict had produced $1.5–2 billion of marine war losses since 28 February, involving roughly 70 damaged vessels.

Hull war premiums in Hormuz have risen from 0.15–0.25% of vessel value to as much as 10%; in September the riskiest voyages were paying around 5%. For a $150 million tanker that means about $7.5 million per voyage. Middle East energy political violence cover is quoted at rates on line (premium as a share of the cover limit) of up to 10%.

Political violence policies generally cannot be cancelled mid-term, which is why Willis Re expects the hardening to last several renewals. Even if tensions ease today, the 1 January 2027 price will carry 2026's losses.

The constraint is the loss ratio, not capital

Lloyd's booked about £1.4 billion of losses from the Middle East conflict in the first half; pre-tax profit fell 16.8% to £3.5 billion. Howden Re sets $2–3 billion of probable losses in the same class against an annual premium pool of $1.5–2 billion.

The public backstop has not opened either. Six months after its launch, the US DFC's war cover facility of up to $40 billion had placed effectively zero dollars of cover. Until a state guarantee kicks in, the price of this line is set at the desks of private reinsurers that lost money on it in 2026.

Second-round effects on freight and goods

The easing in catastrophe cover flows to onshore assets: port, warehouse and factory cover will partly reflect the 7.5–15% reinsurance discount in the first half of 2027. At sea, the war line sets the cost. Hormuz carries about a quarter of seaborne oil and a fifth of LNG, so the war premium feeds straight into the price of delivered energy.

For Türkiye the net effect is asymmetric. Earthquake and fire reinsurance for industrial plant gets cheaper, while the war premium on imported crude and LNG may persist beyond 1 January. The relief in insurance, in other words, does not reach energy-intensive cost lines.

What would disprove this

The thesis fails if Munich Re reports on 12 November, or in its January renewal statement, that marine war and political violence rates fell on 1 January. Broker 1 January reports showing flat or negative political violence pricing would have the same effect. In the other direction, insured catastrophe losses above $50 billion by the end of December would turn cat pricing too, closing the gap between the two speeds.