Bermuda reinsurers face a pivotal stretch as softening conditions test the discipline that delivered bumper returns in recent years, EY has warned in its latest reinsurance outlook.
The report notes that Bermuda reinsurers expressed confidence for the near term, citing strong performance, disciplined retrocession structures and insurance-linked securities inflows.
But shifting dynamics are driving price softening, with cedants retaining more risk, primary insurance growth slowing in some segments, and capital supply continuing to rise.
That confidence is backed by hard numbers. Fitch expects Bermuda re/insurers to post a return on equity near 17% for 2025, down only slightly from 17.8% the prior year, with shareholders' equity growing 12% in the first nine months.
Guy Carpenter has forecast that reinsurers will "comfortably exceed their cost of equity for the third year in a row."
Individual results reinforce the picture. RenaissanceRe reported a return on average common equity of 25.9% for full year 2025, capping a three-year stretch in which the reinsurer more than doubled its book value.
Still, catastrophe losses are creeping higher. Fitch data showed Bermuda re/insurers ended 2025 on a combined ratio of 92%, up from 90.7% in 2024, with the California wildfires adding roughly eight percentage points.
EY's outlook highlights a structural shift in risk-sharing that has defined the post-2023 market. Reinsurers pulled back from covering less severe, more frequent losses, forcing cedants to absorb higher retentions. Fitch has previously estimated that primary insurers absorbed 85% to 90% of catastrophe losses due to elevated attachment points.
Now, with capital abundant, cedants are leveraging a buyer-friendly market. Gallagher Re has noted growing interest in multiyear structured solutions designed to manage net earnings volatility, while the use of captives and parametric products has also expanded.
EY said cedants have opted for alternative risk transfer solutions as reinsurance demand softens in some segments.
The report also addresses longer-term resilience. EY has separately noted that reinsurers are increasing investment in AI, data platforms and cloud-based systems, even as talent shortages in data science remain a concern, with roughly half the workforce projected to retire within 15 years.
EY Bermuda partner Craig Redcliffe said a softening cycle "heightens the need to fully leverage AI, data science and analytics to drive smarter decisions."
He added that leaders who align AI implementation with core business objectives and growth strategies "will differentiate themselves from competitors."
Simon Burtwell, EY Bermuda partner and regional consulting leader, said bold leadership would play a decisive role in executing strategic discipline through the current phase of the cycle.
