The Credibility Report
Edition 21: Rates Fall 15–20%, ILS Assets Recover to $6.5bn
April reinsurance renewals bring deepening property-cat softening (Japan -15 to -20%), ILS assets recover to late-2018 levels (+24% YoY), climate-conditioned ILW strategies materially outperform static models, Palomar launches $375m cat bond.
The reinsurance softening cycle continues to deepen. April renewals saw Japan property-cat rates fall 15–20%, following 10–15% decreases at January renewals — and this is not a temporary blip. Analysts now expect pricing pressure to persist through 2026 and beyond absent a major cat event. Meanwhile, the ILS market is back in force: Stone Ridge's cat bond and ILS fund AUM have recovered to $6.5bn, their highest since late 2018, growing 24% YoY. This edition surveys the rate environment, ILS market recovery, and new research on climate-conditioned ILW strategies that materially outperform static models.
— Ron Richman, Founder, InsureAI
Headlines
Property Re Rates Fall 15–20% at April Renewals — Persisting Through 2026
April renewals brought sharply lower Japan property-cat reinsurance pricing, following 10–15% decreases at the January renewals. According to TD Cowen analysis, rate declines in property-cat are pressuring top-line growth and underwriting results for specialty and reinsurance carriers. Global reinsurance capital reached $785bn at year-end 2025 (Aon), and with capital abundant, pricing pressure is expected to persist through 2026 absent a major cat event. Florida is seeing incremental reinsurance demand as over 600,000 policies have shifted from Citizens to private insurers since year-end 2024.
Reinsurance News / TD CowenDecision Delta
- Signal: Correction phase deepening; property-cat rates declining at an accelerating pace.
- New vs last issue: Yes — April renewal data confirms Jan trend and extends the forecast.
- Functions affected: Pricing, underwriting, reinsurance purchasing.
- Direction: Softening across property-cat, both reinsurance and E&S primary.
- Horizon: Through 2026 minimum, potentially beyond without major loss event.
- Confidence: High — multiple broker and investment analyst sources.
- Source quality: High — TD Cowen equity research, Aon capital data.
- Actuary action: Revise cat load assumptions downward; review reinsurance purchasing strategy for cost-efficiency.
Stone Ridge ILS Assets Recover to $6.5bn — Back to Late-2018 Levels
Stone Ridge Asset Management's combined mutual cat bond, ILS fund, and diversified alternatives strategies have grown to approximately $6.5bn as of March 2026 — the highest since late 2018. The High Yield Reinsurance Risk Premium Fund (cat bond-focused) reached $4.32bn, a record high, while the Reinsurance Risk Premium Interval Fund (spanning ILS, sidecars, and collateralized reinsurance) held at $1.5bn. The Diversified Alternatives Fund now has $746m in direct cat bond and ILS holdings, representing 39% of the strategy. Overall AUM has grown 24% YoY, recovering from a low of $2.56bn in 2022.
Artemis.bmDecision Delta
- Signal: ILS market structural recovery; investor appetite for cat risk is strong.
- New vs last issue: Yes — March 2026 AUM figures are fresh this week.
- Functions affected: Reinsurance purchasing, capital markets, ILS investment.
- Direction: Growing ILS capital = more competition for traditional reinsurers.
- Horizon: Structural trend; capital continues to accumulate in ILS.
- Confidence: High — official fund reporting data.
- Source quality: High — Artemis data from official fund disclosures.
- Actuary action: Monitor ILS capacity growth as a structural softening driver in reinsurance pricing.
Daiichi Life Reinsures Yen Block with Prismic Life — AM Best A- Rated
Daiichi Life Insurance Co. is set to reinsure a Yen-denominated in-force block of whole life and annuity policies with Prismic Life Reinsurance, a Bermuda-based life and annuity reinsurer. Policyholder obligations remain unchanged; Daiichi continues to administer and service the policies. Prismic's model combines insurance expertise with operational scalability and a long-term investment approach, providing customized reinsurance and balance sheet management across life and annuity products. Prismic Life Reinsurance International was recently rated A- by AM Best and A+ by Rating and Investment Information (R&I).
Reinsurance NewsDecision Delta
- Signal: Life reinsurance market active; Japanese life insurers optimizing capital.
- New vs last issue: Yes — Daiichi/Prismic transaction announced this week.
- Functions affected: Life reinsurance, ALM, capital management.
- Direction: Positive for Prismic; Daiichi managing in-force block efficiency.
- Horizon: Transaction-level; ongoing market development.
- Confidence: High — official transaction details from Reinsurance News.
- Source quality: High — Reinsurance News primary reporting.
- Actuary action: Life actuaries: monitor Japanese life reinsurance flow to Bermuda reinsurers.
Climate-Conditioned ILW Strategies Outperform Static Models by Up to 40%: Reask / LGT Research
A new working paper by catastrophe modelling specialist Reask and ILS investment manager LGT ILS Partners demonstrates that a climate-conditioned Industry Loss Warranty (ILW) strategy materially outperforms traditional static modelling approaches. Across a 40-year back-test (1985–2024) of 36 regional ILWs, the climate-conditioned strategy — which adjusts loss distributions using seasonal weather forecasts (ECMWF SEAS5) via Reask's Climate-Based Risk Adjuster tool — achieved up to 30% higher average returns and up to 40% better risk-adjusted returns compared to static long-term climatology benchmarks. Average drawdowns during high-loss years were up to 50% lower. The key insight: cat models built on long-term stationary climatologies create a structural blind spot, as year-to-year hurricane activity is predictable using seasonal forecast data.
Artemis.bm / Reask / LGT ILS PartnersDecision Delta
- Signal: Seasonal climate conditioning can materially improve ILW investment performance.
- New vs last issue: Yes — new research paper this week.
- Functions affected: Cat modelling, ILS investment, ALM, reinsurance structuring.
- Direction: Disruptive to static cat modelling paradigm.
- Horizon: Research stage; implementation implications for cat model users.
- Confidence: Medium — academic working paper, 40-year back-test, needs peer review.
- Source quality: High — Reask (established cat modelling firm) + LGT ILS Partners.
- Actuary action: Cat modellers and ILS investors: review assumptions around stationarity in loss distributions.
KatRisk Acquires RED — Bolstering Multi-Peril Cat Modelling Platform
Catastrophe risk software provider KatRisk has acquired RED, a specialist provider of earthquake, flood, landslide, and wind risk models. The acquisition accelerates KatRisk's development of a high-fidelity US earthquake model and strengthens its multi-peril catastrophe modelling portfolio for insurers, reinsurers, and financial institutions. RED's European earthquake model will be integrated into SpatialKat, allowing clients to access earthquake risk alongside KatRisk's other perils (flood, tropical cyclone, severe convective storm, and forthcoming wildfire). KatRisk was itself acquired by Technosylva (wildfire simulation) in late 2024, making this a strategic build-out of multi-peril capabilities.
Artemis.bmDecision Delta
- Signal: Consolidation in cat modelling space; multi-peril platforms gaining priority.
- New vs last issue: Yes — acquisition announced this week.
- Functions affected: Cat modelling, risk management, reinsurance underwriting.
- Direction: Positive for KatRisk's competitive position; expect faster US earthquake model development.
- Horizon: Integration will take 12–24 months.
- Confidence: High — confirmed acquisition.
- Source quality: Medium — Artemis reporting with executive quotes.
- Actuary action: Cat modelling teams: evaluate KatRisk SpatialKat for multi-peril portfolio risk.
Palomar Returns to Cat Bond Market with $375m Torrey Pines Re 2026-1
Palomar Insurance Holdings has launched its seventh catastrophe bond under the Torrey Pines Re program, seeking $375m of capital markets-backed California earthquake and Hawaii named storm reinsurance protection. The issuance comprises four tranches: three for California earthquake (Class A: $125m at 3–3.5% price guidance, attach at $1.49bn; Class B: $100m at 3.75–4.25%, attach at $650m; Class C: $100m) and one for Hawaii named storm ($50m target). This follows Palomar's $525m Torrey Pines Re 2025-1 California earthquake cat bond — its largest to date. All tranches provide fully-collateralized reinsurance across a roughly three-year term on an indemnity, per-occurrence basis.
Artemis.bmDecision Delta
- Signal: Continued cat bond market appetite; California quake protection in demand.
- New vs last issue: Yes — new deal launched this week.
- Functions affected: Cat modelling, reinsurance purchasing, capital management.
- Direction: Positive — deep cat bond market providing capacity at competitive terms.
- Horizon: Deal settling over next 4–6 weeks.
- Confidence: High — Artemis confirmed deal details.
- Source quality: High — Artemis deal directory + confirmed issuance terms.
- Actuary action: Florida cat exposed carriers: monitor pricing as spread indicators for mid-year renewals.
Research Spotlight
Paper of the Month
Varying risk exposure in auto insurance: a weighted Tweedie regression approach for mid-term cancellations
arXiv | Score: 43
This paper proposes a new family of Tweedie-based ratemaking models that explicitly account for mid-term policy cancellations. Using an automobile insurance dataset from a Canadian insurer, the authors document a marked difference in claims experience between policyholders who maintain coverage and those who cancel mid-term — the latter group exhibits materially different frequency-severity profiles that standard models miss. The weighted Tweedie approach allows actuaries to model this heterogeneity without requiring separate cancellation models.
Read the paper →From the arXiv
| Paper | Score | Link |
|---|---|---|
| A Comparative Study of Penalised, Bayesian, Spatial, and TRE Methods for Poverty Analysis | 33 | arXiv |
| Bayesian Inference in the Cox Model via Rank-Ordered Likelihood | 28 | arXiv |
| A Data-Informed Variational Clustering Framework for Noisy High-Dimensional Data | 27 | arXiv |
| Modeling and Analysis of Air-to-Ground Cellular KPIs in a 5G UAV Network | 25 | arXiv |
| Spherically Embedded Time Series with Unknown Trend and Periodicity | 24 | arXiv |
What We're Watching
US Property Cat Mid-Year Renewals
Florida-focused renewals in June/July will be the next test of whether April's 15–20% decreases represent a floor or just the midpoint. Watch for Citizens outflow impact on reinsurance demand.
2026 Hurricane Season Forecasts
TSR has already reduced its April forecast citing moderate Atlantic conditions. Colorado State and NOAA forecasts due in coming weeks. Any downward revision will add to softening pressure.
Swiss Re sigma on AI Risk Landscape
sigma insights 01/2026 examines how AI adoption is reshaping the risk landscape for insurers. A direct primary source follow-up to Edition 20's AI production-to-value gap discussion.
EIOPA PE in Insurance Consultation
EIOPA's consultation on private equity (re)insurance acquisitions signals increased regulatory scrutiny. Watch for final guidance and market response, particularly for run-off transactions.