AM Best has revised its outlook for the global reinsurance segment to stable from positive, citing accelerating reductions in property reinsurance pricing and ongoing challenges in US casualty lines.
The rating agency said the revision reflects increasing pressure on property reinsurance pricing, which may affect the segment's ability to sustain operating performance levels achieved over the past three years.
The 2025 calendar year marked the sixth consecutive year in which global insured catastrophe losses exceeded US$100 billion.
According to AM Best's market segment report, reinsurance rates dropped between 10% and 20% during the Jan. 1, 2026, renewal period. The largest declines occurred on accounts not affected by losses.
Dan Hofmeister, associate director at AM Best, said the declines brought pricing closer to pre-2023 renewal levels.
"At the time, that included an industry-wide retrenchment away from lower layers of property catastrophe reinsurance programs," Hofmeister said.
Despite the rate reductions, higher retentions imposed on ceding companies in recent years have largely held. AM Best views this as an indication of sustained underwriting discipline.
Apart from the California wildfires in the first quarter of 2025, the year saw an absence of higher-magnitude individual loss events. Performance in the segment has also benefited from higher attachment levels for reinsurance coverage and a rebalancing of reinsurers' portfolios.
Greg Dickerson, director at AM Best, said the reinsurance segment's operating performance for 2025 is expected to generate returns that exceed its cost of capital for a third consecutive year.
Reinsurance capacity is projected to enter 2026 at record levels, with approximately US$540 billion in traditional dedicated reinsurance capital and US$120 billion in insurance-linked securities capital.
AM Best also revised its outlook for the global non-life reinsurance segment to stable from positive. The outlook for the global life reinsurance segment remains at stable.
AM Best's revised outlook differs from Fitch Ratings, which has maintained a "deteriorating" sector outlook for global reinsurance.
Fitch cited moderately weaker operating and business conditions, expecting combined ratios and return on equity to decline slightly in 2026, assuming major losses stay within budgets. Fitch attributed softer property pricing to reinsurers' moderate catastrophe loss experience and a quiet Atlantic hurricane season.
