P&C Re/Insurers 3Q26 Preview: Commercial Lines Seem Fully Valued, Reinsurers Look More Reasonable

In our view, commercial insurance multiples are full as they reflect returns which are not necessarily sustainable. The same concern also applies to the reinsurers, but we think they are more reasonably valued. We are Overweight on ASIC and PLMR and Underweight on PLGO. We expect commercial premium growth to stay in the low-to-mid single-digit range; the surge in US commercial premiums, from +1% in 2016 to the market peak of +12-14% in 2022/2023, was driven by the overlapping pricing cycles of major commercial products. Today, there is a clearer pattern of price degradation across all major lines of business, not just property, and across all account sizes. Commercial lines competition is most acute in property, but price decreases have become widespread across other lines, account sizes, and geographies. In reinsurance, pricing also remains under pressure, and newer forms of third-party capacity, mostly funded by private capital, are a concern. While we expect soft premium growth and