Moody’s has changed its outlook on the global reinsurance sector to stable from positive, noting that pricing for property reinsurance is declining as the supply/demand balance shifts toward reinsurance buyers.
“Nonetheless, risk-adjusted returns in property reinsurance remain attractive and we expect profitability to be strong over the next year,” the rating agency said in a new report.
It added that property catastrophe pricing during the 2025 renewals has been “largely stable” for coverage attaching at lower return periods (e.g., 1-in-10, 1-in-20 years).
However, rates for more remote layers have reportedly fallen amid the aforementioned increased capital deployment from traditional reinsurers and record cat bond issuance.
Moody’s also warned that property cat pricing is likely to “drift lower” in the absence of a market-changing loss event.
The rating agency pointed to the California wildfires earlier this year, which caused significant insured losses but had little impact on midyear 2025 renewals, as evidence that it would take a very large event, or series of events, to reverse current pricing trends.
Turning to casualty reinsurance, Moody’s observed that prices continue to rise, though the adequacy of US casualty loss reserves remains a risk, as higher claims from increased litigation and settlement costs have reportedly 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 US casualty lines,” Moody’s added.
Elsewhere in the report, the rating agency said that despite higher attachment points remaining largely in place, the firm has seen some signs of loosening terms and conditions in the market compared with recent years.
Moody’s went on, “Several US insurance companies have been able to secure increased amounts of aggregate reinsurance coverage this year, underscoring the more competitive environment in the sector.
“We also note that the inflationary pressures on insured values and portfolio growth among ceding companies can act as a reduction in the effective attachment point on an inflation and risk-adjusted basis. To the extent profitability in property reinsurance lines comes through as expected this year, we think policy terms and conditions could slip further in 2026.”
In closing, Moody’s highlighted the macroeconomic conditions that remain a challenge as global growth slows, stating, “We expect sluggish global growth this year and next as economies adjust to major shifts underway in trade, fiscal, monetary and immigration policies. We expect US real GDP growth of 1.5% in both 2025 and 2026. For the Euro area, we are projecting real GDP growth of 1.1% in 2025 and 1.4% in 2026.
“Against this backdrop of slowing growth, inflationary pressures remain a threat and geopolitical risks are heightened.
“For insurers and reinsurers, labor and materials inflation is slowing down, while medical costs and litigation and settlement expenses continue to rise.
“Risk-adjusted returns remain attractive for reinsurers, but will likely be lower than last year because of reduced pricing and margins in property and property cat reinsurance. Assuming average global insured catastrophe losses, we expect good underwriting results and solid investment income to support strong profitability metrics for the reinsurance sector.”
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