The Credibility Report
The weekly intelligence briefing for actuaries who move markets
January renewals are in the books, and the message is clear: reinsurance is entering a buyer's market. Moody's and S&P Global both confirm sharper-than-expected softening, with Fitch predicting the trend will extend through April, June, and July renewals.
Cat bond issuance is exploding—Aon's business up 50%+ in 2025—while private ILS continues to offer better spreads for those willing to move up the complexity curve. Meanwhile, AXIS posts a 90.4% combined ratio and P&C insurers notch decade-low results.
📰 Headlines
📉 Reinsurance Softening Sharper Than Expected at Jan Renewals
Moody's Ratings and S&P Global confirm January renewals brought greater price softening than the market anticipated. S&P signals softening will continue throughout 2026, while Fitch projects the trend extends into April, June, and July property cat renewals. The buyer's market is here.
Read more → Moody's🏆 AXIS Posts 90.4% Combined Ratio as Underwriting Income Jumps 42%
AXIS Capital delivered Q4 underwriting income of $184 million—up 42% year-over-year—as its combined ratio improved to 90.4%. Premium growth continues to climb. The specialty insurer joins a growing chorus of carriers showing hard market rate adequacy finally flowing through to results.
Read more → AXIS Capital📈 Aon Cat Bond Issuance Expands 50%+ in 2025
CEO Greg Case confirmed Aon's cat bond issuance business expanded more than 50% in 2025, riding the wave of record ILS market growth. Cat bond fund returns hit 10.1% for the year, while private ILS delivered 12.47%—though dispersion remains high.
Read more → Aon🌊 W.R. Berkley CEO Sees Early Signs of Property Cat Pricing Fatigue
W.R. Berkley CEO signals early indications of property catastrophe pricing reaching its limits after years of sustained hardening. While rate adequacy remains strong, the pressure from abundant alternative capital and stable loss experience may shift the market dynamics by mid-2026.
Read more → W.R. Berkley❄️ Winter Storm Fern Losses Expected Over $1 Billion
Aon estimates Winter Storm Fern will drive insured losses exceeding $1 billion, potentially rivaling other historic winter events. AccuWeather projects total economic damages of $75-115 billion. UBS and Reuters flag the storm as a key Q1 2026 earnings headwind.
Read more → Aon Weather🚀 Mantas Secures $1.77M for Parametric Solution to Combat Drought
Mantas closed a $1.77 million seed round to develop parametric insurance solutions targeting drought risk in agriculture. The insurtech's approach uses satellite data and smart contracts to trigger automatic payouts, bypassing traditional claims processes.
Read more → Mantas🎯 Deep Dive: The ILS Performance Gap
This week's ILS Advisers data reveals a fascinating divergence: cat bond funds returned 10.1% in 2025, while private ILS delivered 12.47%. That 237-basis-point gap tells a story about where value is hiding.
Why the spread? Cat bonds have become crowded. Normalized valuations and diversifying spreads (per Steiger at Icosa) mean 144A paper is increasingly priced to perfection. Meanwhile, private ILS—collateralized reinsurance, industry loss warranties, sidecars—still offers illiquidity premium for investors willing to accept complexity.
Dispersion is high. The top quartile of private ILS strategies significantly outperformed the median. Manager selection matters enormously. Attachment points, portfolio construction, and timing of deployment drove returns more than market beta.
Actuary insight: As Stephan Ruoff of Schroders Capital notes, investors are "moving up the complexity curve" to find value. For actuaries pricing these structures, the implication is clear: technical sophistication commands premium. The ILS market rewards deep modeling capability.
🔬 Research Spotlight
Finite-Sample Valid Prediction of Future Insurance Claims
A fresh arXiv preprint tackles a persistent gap in actuarial literature: how to construct finite-sample valid prediction intervals for insurance claims in regression settings. Most existing methods rely on asymptotic approximations that fail in small-sample scenarios common in specialty lines.
The key innovation: a strategy that converts predictive methods designed for unsupervised iid settings into valid regression-based predictors. This enables actuaries to generate infinitely many valid prediction intervals—crucial for reserving, pricing, and capital calculations where distributional assumptions are suspect.
Key insight: Finite-sample validity matters because actuarial triangles are notoriously small. A method that produces correct coverage guarantees without relying on "n→∞" is immediately applicable to real-world reserving problems.
Robust Insurance Pricing and Liquidity Management
Joint optimization of pricing and liquidity under model uncertainty—relevant for insurers facing both underwriting and ALM risks.
JRI → PricingOptimal Annuitization and Asset Allocation with Fixed Thresholds
Decumulation strategy optimization for retirees—when to annuitize and how to allocate assets under mortality and market uncertainty.
IME → LifeHealth Insurance Efficiency: COVID-19, Medicare, and ACA Impacts
DEA-based efficiency analysis of US health insurers through the pandemic—identifies structural shifts in performance drivers.
NAAJ → HealthRILAs in the Decumulation Phase
Analysis of Registered Index-Linked Annuities for retirement income—comparing buffer vs floor strategies under various market scenarios.
JRI → Annuities📚 From the Journals
| Paper | Journal | Focus |
|---|---|---|
| Facts about Theodor Wittstein, Gaetano Balducci, and Gauss | EAJ | History |
| Improving Children's Health Outcomes: Effect of CHIP | JRI | Health |
| From Gateway to Value Ladder: Online Insurance Cross-Selling | JRI | Distribution |
| Son Preference, Children's Gender, and Parental Commercial Insurance | JRI | Behavioral |
| RNNs for Multivariate Loss Reserving and Risk Capital | NAAJ | Reserving |
| Robust Mean-Variance Reinsurance Games Under Uncertainty | SAJ | Reinsurance |
🛠️ Practical Takeaways
📊 Pricing
Reinsurance softening creates opportunity to lock in better terms—consider multi-year structures while capacity is abundant.
📋 Reserving
Winter Storm Fern IBNR will develop over Q1—early loss picks range widely. Watch for BI component in commercial lines.
🌀 Cat Modeling
Canadian cat bond expansion signals new modeling requirements—update accumulation scenarios for northern perils.
🏛️ ERM
Private ILS outperformance (247 bps vs cat bonds) highlights value of complexity for sophisticated capital partners.
👀 What We're Watching
Q1 Earnings Season
Will decade-low combined ratios survive Q1 cat activity? Winter storm and residual wildfire losses loom.
April Renewals
Japanese and Australian programs renew—will softening trend from January extend to non-US markets?
Cat Bond Pipeline
With Aon +50% and record issuance, watch for spread compression and sponsor diversification.
AI Pricing Regulation
Pennsylvania denied hundreds of millions in rate requests—regulatory friction on algorithmic pricing intensifies.