Fitch Ratings has revised its outlook for the global reinsurance sector to “deteriorating” for 2026, shifting from a “neutral” stance for 2025.
The agency expects underlying operational and business conditions to weaken compared to the previous year, though it notes that the overall environment will remain favorable for reinsurers worldwide.
According to Fitch, abundant capacity and rising competition are likely to result in gradual price erosion across most reinsurance lines. Property lines may see looser policy terms unless significant loss activity in the second half of 2025 reduces available capital.
Fitch’s analysis indicates that softer pricing since the 2024 peak, combined with higher claims costs from more frequent and severe catastrophe losses, will put pressure on underwriting margins. However, the agency points out that pricing remains high by historical standards, and investment income continues to support profitability, even if it is below recent peaks.
Fitch previously reported that non-life reinsurers experienced reduced underwriting profitability in the first half of 2025, with a combined ratio of 92.7%, up from 88.3% in the same period of 2024. The agency attributed much of this increase to wildfire losses in California, which contributed to higher claims costs and affected overall sector performance.
“Our sector outlook for Global Reinsurance has shifted to ‘deteriorating’, reflecting a moderate decline in otherwise sound business conditions,” said Manuel Arrivé, CFA (pictured above), director at Fitch.
He added, “Anticipated softer pricing conditions in 2026 and rising loss trends will erode underwriting margins, albeit from strong levels. We forecast only a slight decline in 2026 return on equity, moving from the high teens to the mid-teens, a strong level by historical standards.”
Fitch also highlights that strong reserve adequacy provides a buffer for reinsurers, allowing them to use favorable reserve developments in most business lines to manage earnings. Capitalization is projected to stay very strong, enabling continued high levels of capital repatriation and providing ample headroom to absorb unexpected large losses.
The agency reports that 85% of rated global reinsurance groups have Stable Outlooks, reflecting expectations that a mild deterioration in financial metrics will remain within rating sensitivities.
Net premiums for non-life reinsurance fell slightly in the first half of 2025 compared to the previous year. Fitch attributed this decline to softening market conditions, which have contributed to lower premium volumes across the sector.
Fitch notes that positive Outlooks account for 15% of rated groups, suggesting likely upgrades in the next 12 to 24 months, regardless of the sector’s cyclicality. Insurer Financial Strength ratings are generally split between the ‘AA’ and ‘A’ categories, while ‘BBB’ to ‘BB’ ratings are mostly assigned to smaller companies in emerging markets, where operating environment and sovereign-related risks are more pronounced.
Market estimates for first-half 2025 insured property catastrophe losses range between US$80 billion and US$100 billion, well above long-term averages for the period. These losses were driven by events such as the Los Angeles wildfires and severe convective storms in the US.
Swiss Re projects that natural catastrophe losses will continue to rise at a rate of 5%-7% annually. Fitch expects primary insurers to retain the largest share of these losses, with only a modest increase in claims inflation directly attributable to trade tariffs.
US social inflation is expected to continue rising at 10%-15% a year, increasing long-term US casualty claims through higher litigation and jury awards. While recent state-level tort reform efforts have gained momentum, Fitch notes that the impact on the casualty market remains uncertain.
What are your thoughts on this story? Please feel free to share your comments below.
