KBRA releases research previewing the 2026 Atlantic hurricane season (June 1 to November 30). While the season is forecast to be below normal, it does not eliminate catastrophe risk. Even a quiet season can produce a single storm that generates outsized insured losses if it strikes a high-value, coastal market. Insurers enter this season with stronger capital, improved underwriting results, and broader reinsurance availability than in 2022-23. At the same time, rate pressure, loss-cost inflation, geographic concentration, attachment point discipline, and reinsurance counterparty and exhaustion risk can still pressure key financial metrics.

Key Takeaways

• Below-Average Hurricane Activity Expected; Landfall Risk Remains Unforecastable: The average market forecast points to a below-normal 2026 Atlantic hurricane season, with approximately 12 named storms, five hurricanes, and two major hurricanes—below the 1991-2020 National Oceanic and Atmospheric Administration (NOAA) averages of 14 named storms, seven hurricanes, and three major hurricanes. The NOAA assigns a 55% chance of below-normal activity due to a shift in conditions that have contributed to storm development over the past three decades. These conditions—including warm ocean temperatures and weak trade winds in the North Atlantic and Caribbean, low wind shear, and a conducive West African monsoon—are not expected to reverse completely, but are expected to be weaker than in previous years. A lower-frequency forecast does not materially reduce single-event landfall risk.
• Strong Capital and Reserves Provide Robust Buffer: U.S. property and casualty (P&C) insurers have bolstered their capital adequacy and benefited from favorable reserve development, particularly in property business. As a result, most carriers ended 2025 with record surplus positions, which have been largely maintained through Q1 2026. This capital base should make a single large hurricane an earnings event rather than a capital event for most rated carriers, although smaller regional writers and coastal specialists remain more exposed to event volatility.
• Abundant Reinsurance Capacity: The reinsurance market has continued to soften at the latest 2026 renewals amid abundant traditional and insurance-linked securities (ILS) capacity. In 2025, some loss-impacted programs still faced low-single-digit reinsurance pricing increases. However, feedback from KBRA-rated primary carriers indicates that property-catastrophe reinsurance pricing was 10%-25% lower at the June 2026 renewals, despite well over $100 billion of global insured natural catastrophe losses in 2025 and ongoing macroeconomic volatility. While reinsurers faced rate pressure in 2025 and 2026, rates remain well above 2017 levels, when the reinsurance industry was in a soft market. Dedicated reinsurance capital continued to expand by year-end 2025, driven by strong growth in alternative capacity, including record catastrophe bond and ILS issuance, along with increased traditional capacity as higher prior-year premiums continued to be recognized. In previous years, due to the relative unavailability of reinsurance at lower levels of catastrophe programs, many insurers adjusted their reinsurance structures by retaining more low-level losses or utilizing captives. Reinsurers now face increased competition for lower layers of coverage, while plentiful capacity continues to support competitive pricing at the top of reinsurance programs. Lower reinsurance costs are credit positive only if cedants preserve risk-adjusted rate adequacy, maintain prudent retentions, and manage counterparty, reinstatement, and exhaustion risk.
• Recent Underwriting Profitability Has Heightened Competition: Following a benign 2025 hurricane season, primary carriers continued to generate solid underwriting margins and to grow policyholders’ surplus organically. This has increased rate competition from both established and newly formed insurers and encouraged some carriers to reopen territories or expand voluntary writings. Primary carriers could generate lower underwriting margins if rate decreases outweigh the benefits of lower reinsurance costs. An active 2026 season or a major landfalling hurricane could also erode earnings for catastrophe-exposed regional carriers. Major landfalling hurricanes could swiftly push combined ratios back above 100%, generating underwriting losses and eroding surplus positions. While prudent pricing and strong reserves will remain crucial for absorbing potential catastrophe losses, if 2026 marks another year of manageable storm activity, KBRA expects its Insurance Financial Strength Ratings (IFSR) to remain Stable across most of its rated universe.

Current KBRA ratings incorporate catastrophe exposure through stress-based assessments of capital adequacy, reinsurance protection, operating performance, liquidity, and enterprise risk management rather than through reliance on a single seasonal forecast. Isolated IFSR downgrades could occur for insurers that experience outsized losses relative to capital or demonstrate inadequate pricing, reserving, or reinsurance protection. Absent a particularly severe hurricane season, most rated insurers should be able to absorb storm losses through earnings or surplus without materially impairing claims-paying ability.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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