Fitch revises global reinsurance sector outlook to deteriorating

Fitch Ratings has revised its global reinsurance sector outlook to ‘deteriorating’ from ‘neutral,’ anticipating moderately weaker, but still sound, operational and business conditions in 2026.

The ratings agency expects abundant capacity and rising competition across most property lines to gradually erode prices, while rising claims costs—driven by more frequent and severe catastrophe losses and persistent social inflation—will pressure underwriting margins in its base case.

Capital supply from traditional and alternative sources, which is currently at a record high, is projected to further outpace incremental demand from cedants over the next 12 months, shifting pricing power increasingly in favour of reinsurance buyers.

More competitive conditions are expected to continue market softening—particularly in property catastrophe—unless a very significant loss event occurs in the second half of 2025.

Competition is likely to remain price-driven, but Fitch anticipates policy terms will loosen from the very high standards set in 2023.

Combined ratios and return on equity are expected to slightly deteriorate in 2026—assuming major losses remain within budgeted levels—primarily due to lower pricing since mid-2024 and rising loss costs. This will be partially offset by preserved underwriting discipline, active portfolio optimisation, and supportive investment returns.

Capitalisation is expected to remain strong, providing headroom to absorb market shocks. Over the past two years, P&C reserve buffers have generally strengthened, enhancing balance-sheet resilience and providing flexibility to smooth earnings.