Gallagher Re's 2026 Global Facultative Market Report puts US and Canadian property facultative rate declines at 25% to 30%, with loss-affected accounts also taking double-digit reductions for the first time in this cycle.

The comparison that sizes it: Howden Re's property catastrophe treaty rate-on-line index fell 14.7% at January 2026 and Guy Carpenter's fell 12%. Facultative moved roughly twice as far.

Key Takeaways

  • 25% to 30% down in US and Canadian property fac against a 14.7% treaty benchmark decline, so per-risk economics have shifted considerably further than aggregate treaty data indicates.
  • Loss-affected accounts are softening too. Through 2024 and early 2025 they were the holdout; their participation now is what marks the change from selective to broad-based.
  • $648 billion of dedicated reinsurance capital at year-end 2025, up 11%, against reinsurance demand growth of 1.4%.
  • 82.5% composite combined ratio and 19.3% ROE in 2025, the best on Gallagher Re's record since 2014, which funds further capacity through retained earnings.
  • Casualty fac went the other way, with North American auto liability up 10% to 25% and umbrella and excess taking double-digit increases for a seventh consecutive year.

Fac Moves First Because It Never Stops Moving

Facultative covers individual risks case by case, so it reprices continuously rather than at fixed renewal dates. That is the whole reason it leads.

Treaty renewals clear on January 1, April 1, June 1 and July 1 and produce aggregated benchmarks. Fac clears risk by risk, so new capacity gets tested against live submissions immediately, and withdrawal after a loss event shows up the same way. Pablo Munoz, CEO of Global Facultative Reinsurance at Gallagher Re, described the current market as one where "differentiation is present but remains modest, reflecting a soft market rather than a structurally segmented one."

Region Property Fac Rate Change Notes
US & Canada Down 25-30% Loss-affected accounts also saw double-digit declines
UK Down 25-30% Some reaching 40%; carrier growth targets driving competition
Latin America & Caribbean Down 10-20% Broad-based across the region
Chile & Argentina Down 30-40% Loss-free risks; among the steepest global declines
Australia & New Zealand Down 15-20% High-hazard sectors up to 30%
South Korea Down 20%+ annually Five-year softening trend on large accounts
Japan Down 3-5% Most modest decline globally

Regional spread maps to loss experience and local competition. Japan's 3% to 5% reduction reflects higher recent loss frequency and strong domestic reinsurer positions. Chile and Argentina at 30% to 40% on loss-free risks reflect international capital seeking exposure uncorrelated with US hurricane and wildfire. The UK's steepest placements, reaching 40%, were attributed by Gallagher Re to carrier growth targets rather than to fundamentals, which is a different mechanism: premium income targets exceeding the growth available at adequate pricing.

US conditions amplify all of it. There have been no continental US hurricane landfalls since 2023, Q1 2026 catastrophe losses ran about $13 billion, 50% below the five-year average, and Florida domestic property insurers posted a $1 billion underwriting gain in 2025 against $235 million in 2024 and a $132 million loss in 2023.

The Benchmark Understates the Saving

For anyone setting a reinsurance load, the gap between the two indices is the finding, not the fac number on its own.

A rate indication that calibrates ceded cost off published treaty benchmarks picks up a 14.7% decline. A cedent placing individual risks facultatively is seeing 25% to 30%, and on some UK placements 40%. The per-risk economics have moved roughly twice as far as the treaty data implies, so a filing built on the aggregate benchmark understates the savings actually available and, by extension, overstates the ceded cost embedded in the rate.

Capital explains the size of it. Dedicated reinsurance capital reached a record $648 billion at year-end 2025, up 11%, split $513 billion traditional and $135 billion alternative, with the alternative side's 18% increase the largest annual gain Gallagher Re has recorded. Demand grew 1.4% against supply growth of 11%. Traditional capital has expanded 50% cumulatively since 2022 while revenue grew 20%, and revenue growth itself fell from 9.7% in 2024 to 1.2% in 2025.

Catastrophe bonds compound it indirectly. Issuance hit a record $25.6 billion in 2025 across 122 transactions, against $17.7 billion the year before, with the outstanding market at $63.9 billion by the end of Q1 2026. Cat bonds do not compete with fac placements directly, but every catastrophe layer they absorb frees traditional capacity that then competes somewhere else.

Casualty is the control case that shows this is capital rather than sentiment. North American auto liability fac rose 10% to 25%, umbrella and excess took double-digit increases for a seventh consecutive year, and US liability claims have risen 57% over the decade through 2023. Capacity is abundant everywhere; it is only cheap where the loss trend allows.

What the Discount Has Not Been Tested Against

The property declines are defensible on the loss record and untested against the loss distribution, and those are different statements.

Three benign years, Florida tort reform, and improved primary portfolios all justify pricing below the 2023 peak, and an 82.5% composite combined ratio says the segment still earns at these levels. But reinsurers took only 11% of the $107 billion of global insured catastrophe losses in 2025, down from 20% before 2023, because attachment points moved up. That structure insulates reinsurer results in moderate loss years, which is exactly the condition under which the current rate level has been observed. A $50 billion single event is where the 25% to 30% reduction gets its first real test.

The forward numbers are already tightening. J.P. Morgan projects reinsurer returns on equity compressing toward roughly 10% in 2026 against an estimated 11.7% cost of equity, and Moody's has compared the current decline to the 2013-2014 softening. Writing the same premium volume on a materially larger capital base is what 1.2% revenue growth against 11% capital growth describes.

The retention question is where a cedent can make it worse for itself. Buyers are testing lower per-risk attachment points against fac pricing, while reinsurers, per Gallagher Re, remain adamant about defending the higher retentions imposed from the start of 2023. Taking retentions down while capacity is cheap is the move that raises portfolio volatility precisely when capacity contracts and fac hardens faster than treaty, which is the same speed advantage that made the segment a leading indicator in the first place.

Further Reading

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