The reinsurance market continues to be buttressed by robust risk-adjusted capitalisation, fuelled by retained earnings and disciplined capital management, however, various headwinds persist, according to Stefan Holzberger, EVP & Chief Operating Officer at AM Best.
Holzberger said, “The reinsurance market continues to be buttressed by robust risk-adjusted capitalisation fuelled by retained earnings and disciplined capital management. Underwriting profitability remains strong, augmented by a surge in investment income owing to elevated interest rates.
“Further, reinsurers have made considerable advances in risk management by strategically prioritising artificial intelligence and data-driven underwriting, which has reinforced underwriting discipline and strategic selectivity.”
However, Holzberger stressed that challenges abound, with reinsurers facing persistent headwinds such as social inflation, climate change, and rising geopolitical tensions.
“Social inflation has driven adverse casualty reserve development, particularly in the United States, while climate change has led to an increase in the frequency and severity of natural catastrophes. Growing geopolitical tensions and trade disputes have increased volatility in global financial markets, claims costs, supply chain disruptions, and risk assessments and pricing,” he said.
Holzberger highlighted Swiss Re’s shift to IFRS 17 reporting, now ranking as the world’s largest reinsurer based on year-end 2024 revenue, overtaking Munich Re.
He noted that established reinsurers have strengthened their capital bases via secondary equity offerings, as well as through disciplined retention of earnings and a surge in investor appetite for catastrophe bonds.
In the insurance-linked securities (ILS) market, capacity continues to grow, driven by record-breaking cat bond issuance in H1’25.
Moreover, reinsurance renewals pricing was the most favourable pricing for cedents in several years at mid-year 2025, signalling intensified competition among capacity providers.
Holzberger added, “Flourishing annuity sales, using reinsurance as a strategy, and rising competition from new market entrants continue to support activity in the life/annuity segment, which remains well capitalised and positioned for robust growth.”
He concluded, “Europe’s four largest reinsurers—Swiss Re, Munich Re, Hannover Re, and SCOR—continue to benefit from business written through the hard reinsurance market, with strong pricing and terms and conditions, which facilitate robust performance metrics for their property and casualty reinsurance segments. Lloyd’s reinsurance business has grown strongly in recent years and the market remains attractive with the growing deployment of third-party capital and influx of new syndicates.”
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