By the time you read this, the Halloween candy will be gone, and you'll be getting ready to stuff your face with Thanksgiving turkey! Before we know it, we'll be ringing in 2026.

The last few months of the year are a great time to look back on the year that's passed and start planning for the next. For me, there's a lot of excitement and renewed energy that comes with thinking about a new year and all the things I want to accomplish and make happen. If you're anything like me, your list of things you wanted to do in 2025 was much larger than what you could have feasibly accomplished, so adjust goals accordingly and roll some of the more pertinent ones to the year ahead.

It's Full Speed Ahead in the E&S Property Market

Competition and capacity have continued to accelerate in the Excess and Surplus (E&S) property market. The rate at which managing general agents (MGAs) are starting up and automated capacity is being created is both exciting and alarming.

The exciting part is that brokers have more capacity than they need on just about every deal, and many clients are using that to buy back limits and coverages that were lost to them in 2023. Clients are also using some of the premium savings created to lessen deductibles that were hard to digest in years past.

The alarming part is more on the underwriting side — many are increasingly concerned that the current market environment is driving rates and underwriting conditions down fast. So fast, in fact, that we could be setting ourselves up for increased volatility and less stability as profit margins deteriorate for carriers.

At the 2025 WSIA Annual Marketplace and in recent discussions with carriers, most underwriters indicated that they're still running anywhere from 7.5% to 10% above technical pricing across their books, but if the market drops 10% to 15% next year, they'll quickly be pricing business at a break-even point or at a loss, according to technical pricing. Making the underwriting profit they need will become more challenging if weather activity is more prevalent.

Good News for Carriers and Buyers

One can easily understand why capital is flocking to the insurance market, and with another year of virtually no meaningful hurricane activity impacting the Atlantic and Gulf Coast, carriers are set to make another strong profit for the third year in a row. These carriers spent roughly seven years leading up to 2023 losing money underwriting, so these profits are helping create a more favorable trading environment for all.

I just returned from a two-week trip to London with clients, and the news is extremely positive for insurance buyers. Catastrophe exposed property rates are down 15% to 20% this year, and all signs are pointing to more of the same next year, but with the expectation that the level of rate deceleration is likely to slow down. Most of the syndicates we talked to are budgeting down 10% for next year and expect to write less business by design. Many are signaling that they won't continue to chase the market down but will look to do what they can to be commercial for long-term and profitable clients. Only time will tell, but I anticipate underwriters will try to dig their heels in a bit, especially when it comes to underwriting terms and conditions that got way too relaxed during the last market decline.

On the buyer side, 2026 should provide us with another year of competitive renewals. While this competitiveness can be frustrating to carriers, the general opinion of the marketplace is that underwriters are going to continue to work hard to keep the business they want, try to trade more rate versus terms and conditions, and ultimately, be aggressive on new business that fits their appetite and portfolios. By being aggressive on new business, clients will have a lot of options in terms of what carriers they want on their programs, and carriers that are being difficult and less commercial can — and will —easily be replaced. In 2026, much like 2025, clients will have a similar choice of taking more savings or using some of the savings to buy enhanced coverages. We expect many clients will continue to spend some of the savings on reducing retention levels and buying more limits.

The Effects of 2025 Losses (or Lack Thereof)

The market is operating as if there haven't been any material events this year; the reality is that 2025 isn't without claims, but they aren't meaningful enough to slow down the market.

The year is currently sitting around $60B to $70B of insured losses in the North American property market, driven by the Los Angeles wildfires that started the year and followed by some flood and convective events in the spring. Just like the hurricane season, wildfires out West have remained very quiet, and a few early fall rainstorms have hopefully lessened the chances of future wildfires before the end of the year.

The market's cyclical nature will continue due to how the market is capitalized and, as I mentioned in the Q2 2025 update, the unlikely event of a $150B+ event.

Reinsurers made some very material changes to what they offered carriers in 2023, and that change is giving added protection to reinsurers. As a result, the cumulative total needed to move the market direction is no longer at the $100B level it once was perceived to be.

Line Setting and Deals in 2025

One of the most interesting parts of 2025 is the way carriers have done their line setting and the way brokers have pushed to rehang deals. With all the increased capacity in the market, many carriers are writing larger lines and being pushed by brokers to expand layers. While larger lines can result in slightly larger rate decreases, it has also started guiding us all back towards the mess that was 2023 when capacity was shrinking, layers were more compressed, and you had to create several new layers in a program to replace larger stretch layers at much higher pricing.

Even though we have short memories, surely people remember having to create a new layer with five markets to replace $25M of capacity in a mid-to-high buffer layer that came at a cost of three times what it went for the year prior. Buyers should be cognizant of that situation and might consider an "if it isn't broke, don't fix it" strategy.

Savvy buyers will focus on heavily bifurcated programs with more participants and trading partners. In the long run, having more partners makes replacing capacity easier than having to replace larger lines when the market cycle swings again and things contract. Most of our clients like to talk about long-term stability above all else, so expanding layers and eliminating buffer players just for another percentage or two of rate isn't the soundest approach if your goal is stability and partnership.

A Category-by-Category Look Back at 2025 and Into 2026

Below are some of our observations from 2025 and what we expect in 2026 by geography and asset class:

Named Windstorm/Tier 1 Gulf Coast Business

There are no longer any issues securing the limits clients want or need at competitive market pricing. Carriers have increased line size throughout the year to try to take in more premium at what they feel are still adequate technical prices, and this segment has averaged 17.5% to 22.5% down over the course of the year.

Many clients have replenished limits and pursued lower retentions through buy downs, which is propping up premium spend, but other clients just want to take the savings and run. MGAs continue to be very aggressive on new business, and some clients have even opted to pursue mid-term marketing strategies, which has been frustrating to incumbent carriers.

As we look ahead to 2026, the expectation is more of the same, with rates lessening a bit but capacity still being in abundance.

Valuation/Replacement Cost/Insurance to Value

In 2023, every conversation started with "valuations" or "reinsurance constraints," and both terms seem to have evaporated from insurance lingo in 2025.

My professional opinion is that carriers are still very much aware of working with clients with correct valuations and supporting them with more aggressive underwriting, but carriers are also being more lenient with clients that are still not quite up to snuff.

Smart buyers will continue to uptick their values with inflationary adjustments to make sure they don't fall behind, and clients that take that approach will likely see slightly larger rate reductions as a result. Markets are closely watching for clients that want to play the valuation game, and those that do will have a tougher time getting margin clauses removed and securing blanket limits.

For clients with favorable insurance-to-value metrics, securing blanket limits has been easy this year, and any account with scheduled limitations either has a valuation problem or hasn't been properly marketed.

Wood Frame Construction

This category is a bit of a head-scratcher, but clients are reaping the benefits of market conditions in a big way. The level of capacity for wood frame deals is sitting north of $400M for a single risk. With this much capacity available in the market, rates have regressed from their heights in 2022 and 2023.

The American construction industry has slowed for wood frame apartment construction, which is making the availability of business a bit scarcer. As a result, carriers and automated capacity line slips are competing with one another, and a project that would have once gone for $0.75+ per year is now getting done consistently for sub $0.40 per year. It's almost as if carriers have forgotten how bad losses can be when one of these projects has something go wrong towards the end of the build.

On top of reduced rates, security requirements have relaxed, and carriers are giving clients more flexibility in terms of how they secure and protect their sites.

California Earthquake

With the exception of the mega accounts, California Earthquake (CA EQ) risks never had the same hard market as Tier 1 wind-exposed clients, so rates are down an average of 12.5% to 17.5% in this space this year. I think we'll easily see another 10% next year based purely on the availability of capacity, and most clients will have an opportunity to buy more limits and still save money if they wish.

Multi-Family

This class is always tough because the losses never go away, but it continues to be a sought-after asset class for MGAs and carriers that are looking for premium growth. Seeking habitation business purely for premium growth is a dangerous endeavor and is one of the reasons why Multi-Family still remains somewhat volatile. Those that consistently underwrite with higher deductible levels and place an emphasis on asset quality continue to see better results than those that are chasing premium.

All in all, most multi-family clients are seeing relief this year, even those with claims. Most habitation clients with favorable loss experience have seen rates drop 20% this year, and those with a few claims that killed underwriting profit have probably ended up with flat to 5% off.

I expect rate reductions to slow down significantly in 2026, especially for those that are reaching historically low rate levels. The other interesting observation for 2025 that will likely continue in 2026 is that some standard carriers are still making things challenging for their clients by pushing excessive increases in valuations and providing limited flexibility on additions and deletions, which is driving business from the standard market to the E&S market.

Wildfire

The horrific Los Angeles fires at the start of the year did virtually nothing to change the trajectory of this space. If anything, it was more of a reminder for carriers that the exposure isn't going away any time soon. Ultimately, the LA wildfires were mostly personal lines events that standard carriers are coping with, so the only customers that continue to feel pain are homeowners and those being dropped by their package or standard carrier and are entering the E&S market for the first time.

Just about every E&S client likely saw 10% to 20% off their renewal programs and have been able to get back some of the limits they lost in past renewal cycles. Overall, the rates are still high, and carriers are watching line size, but pricing relief is expected to continue as data science improves and more carriers enter the space to find other avenues to write more premium. Parametric options are still risk transfer strategies clients consider, but most have a very low take-up rate.

Looking Ahead to 2026

2026 will be another interesting year that's set up for one of two outcomes, or more likely, a combination of both.

The year will start with carriers posting healthy profit margins from last year (absent any major CAT events to finish 2025), capacity will be abundant, and property rates will be down 10% to 15%.

My expectation is that carriers will be a bit more aggressive early in the year and then slow things down as wind season approaches. I also expect the level of deceleration to ease, but it will be interesting to see if that holds. If you're on the carrier side and still have margin in your technical pricing, it certainly means you feel that rate levels are still healthy compared to where they were eight years ago.

You could also argue that, like 2025, 2026 may be a year of carriers wanting to write as much as they can while rates are still "good enough." Every underwriter and product line leader I have spoken with is optimistic about more stability and a lessening of the rate decreases, but we'll see if that holds. No matter what happens in 2026, the environment we had in 2025 was more favorable than initial predictions and is a great example of the cyclical nature of the E&S property market.

I wish you all the best as you wrap up the year. If you have any questions, please reach out to my colleagues and me at RPS. We're well set up to handle any market cycle, as evidenced by our success with our clients' insurance programs.

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