The global reinsurance sector is entering a new phase of transition. After a period of robust profitability and hardening rates, Moody’s Ratings has shifted its outlook for the industry from positive to stable for 2025, reflecting a sector at a crossroads – still strong, but facing signs of softening and new complexities. In a roundtable discussion with ReInsurance Business, Salman Siddiqui (EMEA head of insurance, pictured left), James Eck (VP – senior credit officer, pictured center), and Benjamin Serra (SVP – analyst, pictured right) of Moody’s Ratings shared their perspectives on the forces shaping the market, the risks ahead, and the opportunities for reinsurers and cedents alike.
Moody’s recent change in outlook is rooted in a nuanced assessment of market dynamics. “We did shift the outlook,” explained Eck. “While conditions are still really good for the sector, property pricing is pulling back in, terms and conditions are pulling back in, and we’re starting to see signs of some slippage on policy language. On the casualty side, prices have been going up generally, but there’s a question around loss reserves in US casualty – so it’s [about] whether current pricing is getting ahead of those loss trends. We think there’s more adverse development to come.”
The sector’s strong capital position is a key support, thanks to recent years of high property profits and strong investment returns. “Balance sheets are quite strong and that supports the current profile of the sector. If pricing does continue to pull back, if they don’t have those opportunities on the underwriting side, they may look to return capital to shareholders,” Eck noted.
Moody’s latest report underscores this, highlighting that reinsurers’ capitalization is at record levels, with average solvency ratios well above pre-pandemic norms. The sector’s combined ratio improved to 86% in 2023, and return on capital reached a 15-year high, but the outlook for further gains is more muted as pricing momentum wanes.
The property reinsurance market, which saw dramatic rate increases in 2023 and early 2024, is now showing signs of softening as capacity returns and alternative capital – such as catastrophe bonds – floods in. “What we saw during 2025 was the impact of having a quantifiable amount of capital still going into good priced business in property and P&C,” said Eck. “Then you had two sizeable hurricanes last fall and the Californian wildfires which we thought might have given more support for reinsurance pricing but it didn’t make a huge difference. There still seems to be a lot of capital in the market.”
Siddiqui added: “It’s interesting how fast the tide has turned. The cycle moved quite fast back to the softer market. But even if there’s a slight decline it’s still pretty adequate. At the moment I think rates should still be adequate but a lot will depend on how aggressive this hurricane season is.”
Alternative capital continues to play a growing role too, with cat bond issuance reaching record highs in 2024. “On the ILS side, you see more primary insurance companies looking to… cat bonds, which can be used by reinsurance companies themselves in the market,” noted Serra. Moody’s report confirms that cat bond issuance hit a record $16 billion in 2024, with alternative capital now accounting for over $100 billion of global reinsurance capacity.
Other market observers, including S&P and Fitch, have echoed Moody’s view that abundant capital and a benign catastrophe environment have contributed to a more competitive, softer property market heading into 2026.
While property rates are softening, casualty reinsurance prices are still rising - driven by loss severity, legal judgments, and ongoing reserve uncertainty in the US. “Pricing has been good in US casualty and a lot of that business is quota share business,” said Eck. “The severity and the legal judgments, jury awards, have created much higher losses in casualty lines. The quickest thing you can do to deal with it is raise pricing and try to get ahead of some of those trends.”
European reinsurers have pulled back from US casualty, leaving opportunities for Bermuda-based and specialist reinsurers. Siddiqui pointed out: “Litigation financing has stabilized. As interest rates moderate we might see a reasonable pick up in litigation financing. As for pricing for casualty, you can say the rates are increasing – but is it enough? We don’t know.”
Moody’s report highlights that while casualty rate increases are helping, the adequacy of reserves remains a concern, especially as social inflation and legal trends continue to drive up claims costs.
A hallmark of the recent hard market was the tightening of terms and conditions (T&Cs), but this too is beginning to unwind. “We’re starting to see some initial signs of seepage,” Eck observed. “Brokers are working hard to chip away at some of the terms when they can. This year, we’re seeing things around the edges, like hours clauses, perhaps not be as strict as they previously were. There’s also a lot more aggregate coming back but it’s a lot more well priced and structured than it had been previously. As competition intensifies, that’s another area where we could see erosion.”
Siddiqui cautioned that, “Pricing is one thing, but the bigger concern would be slippage on T&Cs and attachment points. That’s what historically has been central. Over time we don’t want to see a return to a situation where aggregate cover becomes the norm.”
The frequency and severity of weather-related catastrophes – especially from so-called secondary perils like severe convective storms and wildfires - continue to test the market’s resilience. “There’s an increased focus on primary insurers to manage their risks better,” said Siddiqui. “Primary insurers are more exposed and they need to work on their underwriting and risk managing.”
Serra added: “The secondary perils have become an issue for the primary industry, rather than the reinsurers.” This shift has led to more risk being retained by primary insurers, with reinsurers pushing some costs down the chain. As a result, primary carriers are investing in improved analytics and risk selection, while reinsurers are tightening coverage definitions and attachment points to limit their own exposure.
Beyond underwriting, asset risk is also evolving as insurers diversify their portfolios. “These days we see some slight changes, maybe more investments in private credit and illiquid assets. Not significant but it’s changing slightly. You need a different type of expertise to understand those risks,” Serra noted. With interest rates and market volatility in flux, managing asset risk is becoming a more prominent part of reinsurers’ and insurers’ overall risk frameworks.
Alternative capital is now an embedded part of the reinsurance business model too. “A lot of the largest reinsurers have larger ILS managers. If you have an expense ratio, you can think ‘how can I use it without adding more risk?’ Many are using ILS platforms to utilize existing capabilities and transfer risk into the capital market and earn a fee for it,” said Siddiqui.
Eck agreed: “It’s become an embedded part of the reinsurance business model. It gives you more options in terms of the fee income you can earn – it gives you an advantage over those that don’t have that. It spreads it to a wider pool of capital. Longer term we expect alternative capital to grow. The reinsurers themselves will be an important part of that growth.”
Looking ahead, the panel sees both risks and opportunities for reinsurers and cedents. “Nat cat is a tricky risk,” Serra noted. “It’s very difficult because of the frequency and the language. You see these charts where in the past you had some volatility – years with low claims and big claims. Now you have nearly a billion every year, driven by a series of events. Reinsurers have pushed some of this cost to the primary insurance companies. And that becomes a risk for the entire industry.”
On the US side, Eck highlighted the need to manage geopolitical and economic uncertainty, as well as the emergence of new lines like cyber. Siddiqui added, “There’s a lot to manage and think about as some of these newer lines of business, such as cyber, become more common. Longer term, being able to find ways to help clients is the opportunity. But there’s a lot to manage.”
As the reinsurance sector moves into 2026, the stable outlook reflects a market that remains well-capitalized and resilient, but also more competitive and complex. With pricing momentum slowing, terms and conditions beginning to loosen, and new risks emerging, reinsurers and cedents alike will need to stay vigilant – balancing discipline with innovation, and adapting to a landscape where capital, risk, and opportunity are constantly in flux.
