S&P Global Ratings suggests that reinsurance pricing has passed its peak, likely tempering earnings prospects for global reinsurers over 2025–2026; nevertheless, the ratings agency maintains a stable outlook for the sector.
Despite pressure to broaden coverage and lower attachment points, S&P noted that underwriting discipline across the global reinsurance industry has remained intact, and reinsurers have retained strong capitalisation.
As of August 31st, 2025, As of August 31st, 2025, S&P’s outlook on 15 of the top 19 global reinsurers was stable. Of the remaining four, its outlook on three was positive and just one had a negative outlook.
The sector’s operating performance is expected to remain strong through 2026. While natural catastrophe events weighed on H1 2025 results, reinsurers are on track to meet their cost of capital for the year, and S&P anticipates similar outcomes in 2026.
Under its base-case forecast, the agency expects an undiscounted combined (loss and expense) ratio of 94%–96% in 2025 and 95%–98% in 2026, with returns on equity (ROE) of 12%–14% in 2025 and 11%–13% in 2026.
As rates remain attractive, such that reinsurers and alternative capital providers are willing to deploy capacity, prices are softening.
Similar to 2025, S&P expects terms and conditions to remain broadly stable in 2026, although global pricing for short-tail lines is projected to decline. This will likely cause underwriting margins to tighten, although the sector’s conservative asset portfolios support its assumption of strong investment returns of 3.5%-4.0%.
Geopolitical tensions and macroeconomic uncertainty may further affect investment returns and underwriting performance.
On the investment side, exposure to more-volatile and less-liquid assets—such as private credit, private equity, hedge funds, and commercial property—poses the greatest risk. Exposure to interest rate risk decreases as the average tenor of the liabilities in a reinsurer’s portfolio shortens, but ongoing interest rate volatility will continue to affect mark-to-market valuations.
On the underwriting side, geopolitical tensions can directly impact lines such as trade credit, political risk, and aviation, and indirectly affect others through slower economic growth or smaller sums at risk. Reinsurers exposed to aviation lines have already suffered losses due to the Russia-Ukraine conflict, while U.S. tariff announcements created capital market volatility in 2025.
S&P emphasised that reinsurers maintain large capital buffers to manage severe events, but these must be carefully managed to prevent natural catastrophes and reserving volatility from exhausting them.
During the 2024 and 2025 renewals, both reinsurance and retrocession saw ample capacity. Reinsurance capital available to cedants increased as reinsurers took advantage of favourable conditions. Over the same period, strong demand for catastrophe bonds bolstered the availability of alternative capital, particularly in the retrocession market.
S&P expects a similar level of capacity at the 2026 renewals. Prices for short-tail lines are projected to fall by about 5%, with variation across regions and business lines. The agency expects reinsurers to maintain a disciplined approach to terms and conditions and focus on risk management.
Property and catastrophe business remains attractively priced, with high demand. Nevertheless, S&P stressed that cautious underwriting and careful portfolio and risk appetite management are critical to avoid outsized technical losses.
Reserve calculations present increasing risks as claim costs rise in certain lines. Notably, U.S. casualty has seen a spike in costs, creating reserving volatility and prompting S&P’s top 19 global reinsurers to strengthen combined reserves by around $6 billion in 2024. Positive performance in short-tail lines has offset the need to strengthen reserves in certain long-tail lines and, in aggregate, its top 19 global reinsurers have continued to release reserves from prior years. However, the size of the positive run-off has been shrinking since 2018, mainly due to adverse developments in U.S. casualty.
S&P expects some reinsurers to set aside further reserves to cover their U.S. liability risk over the next few years, stating that risk is highest for players that increased their exposure when pricing was lower, or that employed less conservative reserving strategies.
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