S&P Global Ratings maintains a stable view of the global reinsurance sector. Reinsurers entered the 2026 hurricane season from a position of strength, supported by record-high capital adequacy and strong year-to-date operating performance. Even so, near-term headwinds are emerging.
Abundant capacity and lower-than-expected catastrophe losses in recent years suggest that reinsurance pricing will remain under pressure through 2027. As a result, reinsurers are likely to face increasing pressure to loosen terms and conditions, while property and casualty (P/C) reinsurers’ underwriting margins and overall profitability will gradually compress over 2026-2027.
That said, we believe underwriting margins and overall profitability will remain sufficient to cover the sector’s cost of capital. This reflects still healthy P/C reinsurance combined ratios, solid net investment income, and strong life reinsurance earnings, provided annual natural catastrophe and large man-made losses remain within the annual budgets.
Natural catastrophes, geopolitical conflicts, and social inflation – which will continue to require robust risk and portfolio management – as well as softening prices may curb near-term growth. However, the sizable protection gap in areas such as cyber risk, renewable energy, and data centers presents growth opportunities.
The sector’s primary risks remain insurance-related rather than asset-related. Natural catastrophe exposure and loss reserve volatility continue to be the key sources of risk, while investment risk remains significantly lower than in the primary insurance sector. We will continue to monitor reinsurers’ exposure to less liquid assets, including private equity, real estate, and private debt.
Rating Trends Support Our Stable Sector View
Over the past 12 months, most rating actions within our benchmark reinsurance group have been positive, reflecting stronger capitalization, robust earnings, and improving earnings diversification. The industry remains highly rated. The average rating on companies in our reinsurance benchmark group (African Re, Arch, Arundo Re, Ascot, AXIS, China Re, Convex, Everest, Fairfax, Hannover Re, Hiscox, Lancashire, Lloyd’s, Munich Re, Pelagos, RenRe, SCOR, Sirius, Swiss Re, and Toa Re) is at the upper end of the ‘A’ category.
Our ratings outlook is stable for 85% of the benchmark group, positive for 10%, and negative for 5%.
Decline In Operating Performance Will Be Manageable
The global reinsurance sector’s operating performance has been strong since 2023. Assuming natural catastrophe losses remain within reinsurers’ budgets in 2026-2027, the sector will earn returns above its cost of capital for the fifth consecutive year. Year-to-date results have been strong, benefiting from relatively low natural catastrophe losses. To date, the Middle East war has not resulted in material losses for the sector.
Our base-case scenario assumes a decline in P/C reinsurers’ underwriting margins as pricing continues to soften. This will increase the combined ratio by about 2-4 percentage points over 2026-2027, assuming that natural catastrophe losses are in line with reinsurers’ projected budgets.
