Nicolas Papadopoulo, CEO of Arch Capital Group Ltd., said last week that the current, more competitive part of the reinsurance cycle is to be expected, and despite softening in property and challenges in casualty, it is still a favourable trading environment.
Arch recently posted its second quarter 2026 financial results, revealing net income of $1 billion amid a rise in catastrophe losses across the business to $201 million.
Across the business, gross premiums written (GPW) decreased by 1.1% to $6.1 billion, net premiums written (NPW) fell by almost 7% to $4.1 billion, and net premiums earned reduced by more than 8% to $4 billion.
Within the firm’s reinsurance operation, GPW did rise slightly but NPW decreased by 10.4% to $1.8 billion, which the carrier said was in part a result of non-renewals, share reductions, and targeted increased retrocessions.
Given the softening property reinsurance market environment, it’s not surprising to see players like Arch trim their books and walk away from business that doesn’t meet desired return hurdles. At the same time, the lower cost of reinsurance could see some reinsurers like Arch purchase more retrocession.
Commenting on market conditions during Arch’s earnings call last week, CEO Papadopoulo noted that after enjoying favourable market conditions in property and short-tail lines over the last five years, re/insurers now face the early stages of a competitive market driven by an influx of capacity.
“This part of the cycle is to be expected,” he said. “Importantly, a more competitive environment doesn’t mean a lack of opportunity, it simply requires greater discipline in where and how capital is deployed.”
Papadopoulo continued: “I truly believe that the market that we are trading in is a favorable market. So, there are business that our teams can, on the insurance side, and to a large extent, on the reinsurance side, there’s new business that we can write. We were made to trade in this type of environment.”
On property specifically, the CEO described rate reductions as a big headwind, emphasising that Arch has to tread carefully as rates continue to fall, which is reflected in the insurance and reinsurance net premiums reducing.
In terms of property catastrophe reinsurance rates, Papadopoulo said on the call that Arch saw rate reductions in the mid-teens, but went on to say that in terms of rate adequacy, the market is not back to the pre-Hurricane Ian levels in 2022.
“So, are we in 2023? Maybe, but it really depends on the region. As I said earlier, we have 50 zones, so some zones are green still and provide adequate returns, and some zones are now red, and some zones are in orange. So, that’s why we actively manage the portfolio. But in terms of index, our view is that we’re still above the prior Hurricane Ian rate index,” said the CEO.
In 2023, the so called property market reset led to significant rate increase for reinsurers, reversing the softening cycle as reinsurers tightened terms and conditions and raised attachment points to avoid the rise in losses from secondary perils. As a result, reinsurers have enjoyed very strong returns over the past three years or so, and full year 2026 results are expected to maintain this trend. However, rates are falling, but importantly, numerous carriers like Arch have noted that rate adequacy remains, given the high base they have
Although cautious on property and property cat, Papadopoulo said that Arch is “much more optimistic on the casualty side” where yes, there is more competition, but importantly, discipline as well.
“I think it’s (casualty reinsurance) an attractive line of business. We like the fundamentals of the underlying business in the specialty/casualty area. The issue, it’s not new, is too much reinsurance capacity chasing too little business. And the way we see it is hit or miss on the terms and conditions. We’re still looking for the right opportunity to add reinsurance casualty to our books in the right lines of business and with the right ceding companies,” he said.
