Facultative reinsurance buyers secured rate reductions across almost every region and line of business in the first half of 2026. Property markets bore the steepest cuts, while the US casualty sector stood as the clearest holdout in an otherwise buyer-driven market. The findings come from Gallagher Re's half-year facultative market report.
US and Canadian property facultative business saw rate reductions of -20% to -25% through the second quarter. Competition was intense across London, Bermuda, and domestic carriers, with new entrants and MGAs adding pressure throughout the period. Multi-year structures attracted interest as some buyers began positioning for 2027 renewals.
In Latin America and the Caribbean, the pace of softening accelerated further. Chile and Argentina recorded the steepest reductions, typically -40% to -50% on well-performing accounts, while Caribbean loss-free accounts achieved -15% to -20%. Mexico, Peru, Colombia, and Brazil generally saw -25% to -30% on loss-free risks.
Reinsurer commission levels in the LatAm region increased, typically in the range of 2.5% to 5%. Soft conditions are expected to persist at approximately -25% to -30% through the remainder of 2026.
Australia and New Zealand averaged -20% and -25% respectively, with reductions of up to -40% in certain high-hazard sectors. Nordic property recorded -10% to -25% on well-performing risks. UK domestic property typically saw reductions of around -20%.
Japan earthquake facultative business averaged approximately -5%. Southeast Asia recorded -5% to -15% on clean risks. South Korea saw -5% to -10% on large corporate accounts, and the Middle East averaged -15% to -20%.
Korea carried a further signal: 2025 was the first year of negative growth in the Korean property market's history. Excessive premium reductions combined with rising reinsurance costs drove the contraction.
"The overall direction of travel is clear: insurers are operating in a market characterized by increased choice, broader engagement and greater flexibility," said Pablo Muñoz, chief executive officer of facultative at Gallagher Re.
The US casualty market diverged sharply from the property trend. Sustained pressure continued across automobile liability, umbrella and excess liability, construction, real estate, and healthcare. Nuclear verdicts, social inflation, third-party litigation funding, and rising defence costs reinforced a cautious underwriting stance.
Capacity remained available but was deployed with increased discipline, with insurers reducing line sizes and raising attachment points in lead umbrella and lower excess positions. International and UK casualty markets recorded reductions of -5% to -25%. Facultative casualty capacity remained constrained globally, with only four to five traditional reinsurance markets actively participating.
The downstream energy market recorded losses of US$250 million to US$400 million in the first half of 2026. That follows US$4 billion to US$4.5 billion in losses the prior year against a premium base of US$3 billion to US$3.5 billion. Despite that loss load, rates continued to ease, with Asia and India seeing reductions of -25% to -40%.
New MGAs and expanded facility structures reduced the volume of open market capacity required in energy facultative. That shift placed further downward pressure on pricing. Geopolitical tensions in the Middle East contributed to increased oil prices and property claims concerns for some regional risks.
The renewables sector continued to attract new capacity, with market forecasters projecting growth rates of up to 20% between 2025 and 2035. The conventional power market largely tracked the downstream rate trajectory.
Across the market, facility arrangements and structured capacity solutions expanded their role during the period. Advances in data and underwriting technology contributed to faster decision-making and more selective risk placement, the report noted.
"Looking ahead, the availability of capacity is unlikely to be the defining feature of the next stage of the market cycle," Muñoz said. "The greater differentiator will be how effectively that capacity is applied to support client needs, underwriting performance and long-term portfolio objectives. Insurers and reinsurers that combine technical expertise with disciplined decision-making will be best positioned to navigate the opportunities and challenges that lie ahead."
