Fitch Revises Global Reinsurance Sector Outlook to ‘Deteriorating’ on Rising Competition

Fitch Ratings has revised its outlook for the global reinsurance sector to “deteriorating” for 2026 from “neutral” for 2025, reflecting its expectation that underlying operational and business conditions are likely to worsen, “although they will remain overall favorable for reinsurers worldwide.”

“Abundant capacity and rising competition are likely to lead to gradual price erosion across most reinsurance lines and looser policy terms in property lines, unless large loss activity [during the second half of 2025] depletes capital,” said Fitch in its Global Reinsurance Outlook 2026, published on Sept. 2.

“Softer pricing conditions since the 2024 peak and rising claims costs – notably from more frequent and severe catastrophe losses – will pressure underwriting margins…,” the report continued.

“Our sector outlook for global reinsurance has shifted to ‘deteriorating’, reflecting a moderate decline in otherwise sound business conditions,” according to Manuel Arrivé, director, Fitch Ratings, who was quoted in the report. “Anticipated softer pricing conditions in 2026 and rising loss trends will erode underwriting margins, albeit from strong levels. We forecast only a slight decline in 2026 return on equity, moving from the high teens to the mid-teens, a strong level by historical standards.”

Fitch said that competition is likely to remain price-driven, rather than being focused on changes to terms and conditions.

“We expect reinsurers to be more flexible in negotiations, offering protection at lower attachment points and for more frequent return periods, including through aggregate covers. Overall, we anticipate that underwriting discipline will slowly start relaxing from the very high standards established in 2023,” Fitch predicted.

Fitch has taken a less positive (or perhaps more negative) view of the reinsurance sector than the other ratings agencies: AM Best, Moody’s Ratings, and S&P Global Ratings.

While AM Best and S&P Global Ratings have maintained their outlooks for the sector – positive and stable, respectively – Moody’s has changed its outlook to stable from positive amid a decline in pricing “as the supply/demand balance shifts toward reinsurance buyers.”

“Capacity in the traditional market is plentiful and capital inflows to the alternative markets, particularly catastrophe bonds, are also pushing prices lower,” said Moody’s in its report, titled “Outlook shifts to stable as property pricing declines, casualty reserve risk lingers,” which was published on Sept. 2.

“We think property-cat pricing will continue to drift lower in the absence of a market changing loss event,” Moody’s added.

AM Best’s positive outlook for the global reinsurance segment has remained unchanged since November 2024. “The structural and cyclical factors underpinning the market continue to justify the positive outlook, which speaks not just to performance but also to the resilience and adaptability of the global reinsurance segment in a time of transition,” said AM Best in its recent report titled “Reinsurers’ Disciplined Capital Deployment and Underwriting Remain Key Foundations,” published on Aug. 14. (See related article: Reinsurers Have Made Major Structural Changes to Improve Profits. Will Discipline Last?)

S&P Global Ratings has maintained a stable outlook for the reinsurance sector. “[W]e view the global reinsurance sector as stable, supported by reinsurers’ robust capital, sound underwriting margins, strong investment returns, and still-favorable earnings prospects above the sector’s cost of capital.”

S&P acknowledged that reinsurance pricing has passed its peak, “which will likely temper earnings prospects for global reinsurers over 2025-2026.”

Nevertheless, underwriting discipline across the global reinsurance industry has not wavered, despite pressure to broaden coverage and lower attachment points, S&P said in its Sept. 2 report, titled “Can Global Reinsurers Stay On Track Through 2026?”

“Reinsurers also retained their robust capitalization. These factors, combined with still-favorable market conditions and the sector’s strong investment returns, support our stable sector view,” S&P added.

Casualty Reserving Risks

While casualty reinsurance prices are continuing to rise, Moody’s said, the adequacy of U.S. casualty loss reserves remains a risk, “as higher claims from increased litigation and settlement costs have led to significant adverse loss reserve development across the sector.”

“However, solid balance sheets and strong investment income will help reinsurers manage the volatility arising from catastrophe losses and the uncertainty associated with reserve adequacy in U.S. casualty lines,” Moody’s continued.

S&P said its cohort of the top 19 global reinsurers continue to release reserves related to prior years, but the amount released has been shrinking since 2018, which has limited the positive impact of such releases on underwriting results.

“The cost of claims in U.S. liability insurance continues to increase, prompting reinsurers to strengthen reserves related to U.S. casualty business by an estimated total of about $6 billion in 2024,” S&P said.

January 2026 Renewals

Fitch highlighted several areas it will monitor during the coming January renewals:

• Property: Heightened pricing competition and potentially more relaxed policy terms could affect reinsurers’ performance to varying degrees. Pricing and earnings sensitivity to large losses is a key factor to follow at renewals.
• US casualty: Adverse loss development could continue, driven by sustained social inflation, but can be mitigated by re/insurers’ prudent underwriting.

Related:

• Viewpoint: Why Reinsurance Industry Often Struggles to Manage Market Cycles
• ‘Big Four’ Reinsurers Maintain Property-Cat Appetite, Despite Signs of Rate Softening
• Reinsurers Have Made Major Structural Changes to Improve Profits. Will Discipline Last?
• Swiss Re Tops List of Largest Reinsurers on Its Shift to IFRS-17 Accounting: AM Best

Topics Trends Reinsurance