S&P Global Ratings reports that reinsurance pricing has passed its peak, which is expected to moderate earnings prospects for global reinsurers over 2025 and 2026.
The industry experienced an increase in insured losses from natural catastrophes during 2025, particularly in the first quarter.
Despite pressures to broaden coverage and lower attachment points, S&P notes that underwriting discipline across the global reinsurance sector has remained intact. Reinsurers have also maintained robust capitalization. These factors, along with favorable market conditions and strong investment returns, underpin S&P’s stable sector outlook.
As of Aug. 31, S&P’s outlook for 15 of the top 19 global reinsurers was stable, with three positive and one negative. The agency took eight rating actions on these reinsurers between January and August, with most being positive. S&P attributes these actions to enhanced earnings diversification, stronger capital positions, and improved funding structures.
Some rating changes were linked to successful strategies that combine primary insurance and reinsurance, while negative actions were associated with adverse developments in the US casualty business, the Russia-Ukraine conflict, or elevated losses from California wildfires.
Despite these challenges, the sector’s largest players, including Munich Re, Swiss Re, Hannover Re, and SCOR, achieved a record average return on equity of 21.1% in the first half of 2025.
S&P forecasts that the sector’s operating performance will remain strong through 2026, continuing a trend that began in 2023. Although natural catastrophe events affected half-year results in 2025, the sector is on track to meet its cost of capital for the year and is expected to do so again in 2026.
S&P’s base-case earnings forecast assumes an undiscounted combined ratio of 94%–96% in 2025 and 95%–98% in 2026, with a return on equity (ROE) of 12%-14% in 2025 and 11%-13% in 2026.
Comparatively, Fitch Ratings expects global reinsurers to see a decline in underwriting results heading into 2026. While pricing is likely to remain sufficient to support positive returns, Fitch projects profitability will come under pressure as market conditions evolve.
Looking ahead, S&P expects terms and conditions to remain broadly stable in 2026, but projects a decline in global pricing for short-tail lines. This is likely to tighten underwriting margins, though the sector’s conservative asset portfolios are expected to support strong investment returns of 3.5%-4.0%.
Reinsurers with exposure to life reinsurance are forecast to see ROEs of 10%–12%. S&P also projects that aggregate reserve releases will be modest, at 1-2 percentage points, given prudent reserve positions.
The agency sees potential for geopolitical tensions and macroeconomic uncertainty to impact investment returns and underwriting performance. S&P highlights that exposure to more-volatile and less-liquid assets, such as private credit, private equity, hedge funds, and commercial property, represents the greatest risk on the investment side.
While exposure to interest rate risk decreases as the average tenor of liabilities shortens, ongoing interest rate volatility will continue to affect mark-to-market valuations.
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