Specialty reinsurance bucks wider softening trend as losses drive divergence: Willis Re

Whilst most reinsurance prices are down and sliding further following one of the most severe cyclical pricing declines in recent memory, some specialty classes are bucking the trend, says Willis Re.

Key points:
Marine liability likely to harden
Cyber rate declines are slowing
PV&T is the standout hard market

By Jon Ogilvie, global head of non-marine specialties at Willis Re

Reinsurance in 2026 is a market of two speeds. Property catastrophe and retro are in one of the most significant softening cycles in decades, with reinsurer capital at record levels and profits strong. In contrast, the market for several specialty lines reinsurance is less uniform. We see pockets of tightening, and some class bifurcation by segment.

Bifurcation grows in marine

Marine classes are diverging across insurance and reinsurance. Driven largely by the 2024 Dali collision with Baltimore’s Francis Scott Key Bridge, marine liability reinsurance costs are very likely to rise. The claim is already the costliest-ever marine loss. One component, a $2.5 billion civil settlement between Maryland and the shipowner, fell to the mutual International Group of P&I Club’s $3 billion excess-of-loss reinsurance programme and from there will flow into the reinsurance and retro markets.

The marine hull insurance market, in contrast, is bifurcated between war-exposed and standard marine risk. The Strait of Hormuz has been largely blocked since February 2026, causing war-risk rates for Gulf transits to spike from a typical 0.25% to as high as 10% of vessel value. They have since declined to as low 3% but lately risen again.

In contrast, marine reinsurance capacity exceeds technical demand. Rate reductions are unlikely to match property cat, but softening is anticipated barring any major losses.

Cyber reinsurance has experienced several years of material rate reductions. The pace of those declines is falling, however, as the threat continues to escalate. July renewals typically declined by up to 20%, but cyber aggregate excess-of-loss rates had fallen by 30% at 1 January.

Capacity oversupply is the predominant driver. With it comes lower attachment points, which are now commonly set at a 115% or 120% loss ratio. Some portfolios will attach below 100%. This different kind of bifurcation shows some reinsurers seeking volume at low attachments, whilst others prefer higher, less volatile layers.

Aviation is also divided, and the picture is complex. Hull and liability pricing continue to recalibrate amid elevated claims activity, supply chain pressures, geopolitical uncertainty and reinsurance discipline.

As a result of these competing rating pressures, pricing is increasingly differentiated by exposure. US airline risk faces a materially tougher environment due to higher attritional losses, social inflation, and liability severity. Excess-of-loss programmes saw low single-digit rate increases at 1 January, with hardening more pronounced in retro layers than first-tier reinsurance. Quota shares have stayed largely stable in capacity and commissions, however.

General aviation remains softer. Abundant capacity is fuelling generally soft market conditions, despite persistent attritional losses.

Losses rewrite the exceptions

Meanwhile, the aviation war is under strong pressure. Some war insurers withdrew capacity and imposed triple-digit rate increases following the mid-2025 Middle East tensions. Concentration risks remain a key concern. A June 2025 Commercial Court ruling meant that insurers were required to pay under war-risk policies for aircraft stranded in Russia after the invasion of Ukraine. AerCap alone secured a $1.035 billion judgment, now under appeal. The outcome will have implications for how war risk total-loss disputes will be treated going forward.

Overall, loss activity has been a greater driver than geopolitics alone. The American Airlines loss and the Air India incident are flowing through quota share and XoL structures, potentially affecting upper layers and hull-war-specific programmes. These claims could directly influence how programmes are structured and priced.

General sentiment in the accident & health market is one of adequate capacity and stable-to-moderately firming prices. The trend is driven by rising large-claim severity (rather than cat-style volatility), particularly in niches like specialty pharma and gene/cell therapies. A&H continues to behave more like a steady margin business than a capital-cycle-driven one.

PV&T breaks from the pack

The standout hard market of the year is terrorism & political violence. PV&T tightened sharply at 1 July as strikes linked to the Islamic Revolutionary Guard Corps reshaped Middle East underwriting appetite. The rethink has been compounded by civil unrest elsewhere. With global PV&T premium at only about $1.5 billion, Willis Re estimates that Hormuz-related war, terrorism, and political violence claims have already reached as much as $3 billion, for a loss ratio nearing 200%.

In response, Middle East energy PV&T is now quoted at up to 10% rate-on-line. That is set to continue because standalone PV&T is typically non-cancellable mid-term (unlike marine war risk, which can be cancelled on short notice and repriced), insurers are required to hold pre-conflict pricing until renewal. That means the hardening will keep flowing through for several cycles, even if the geopolitical situation stabilises.

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