AM Best: Big Four hold cat appetite as rates soften

AM Best says the European 'Big Four' reinsurers still want property catastrophe exposure even as rates soften. The rating agency's Market Segment Report, published Aug. 20, describes a 2026 renewal round that stayed within the cat appetites Swiss Re, Munich Re, Hannover Re and SCOR restructured in recent years — shaped, in AM Best's telling, to attach higher. The report's title frames the four as maintaining their profit targets in a volatile environment. The public summary does not break out the exposure numbers behind that judgment.

The judgment follows a record stretch for the same groups. Fitch Ratings puts their first-half return on equity at a record 21.5% and warns that renewal price cuts, reaching 25% on nat cat lines at mid-year, will erode those gains. AM Best separately counts reinsurance capital at a record $705 billion for 2026, with risk budgets shrinking. A flat cat appetite in this setting suggests the four either still believe property risk earns its cost of capital at current rates, or have decided to hold the line and accept thinner returns.

The read-through for ILS capital is indirect but likely real. Continued demand from the four supports the flow of property cat risk into collateralized markets, since someone has to take the layers they shed. That mirrors the cat bond market, where earlier this year sponsors tested softer terms while first-quarter spreads firmed. The softening price, however, presses down the returns available to sidecars and collateralized reinsurers standing behind those layers. If the pattern holds, risk shifts sideways into ILS just as the price for carrying it falls — a squeeze the cat bond and collateralized reinsurance market would feel in its pricing.

The AM Best report states intent, not outcome. The January renewals are where that intent meets actual attachment points and actual prices, and where the Big Four's use of collateralized structures comes into view.