The global reinsurance market maintains a very strong capital position that has benefitted from favorable earnings in recent years, with solid underwriting profits and resilient investment returns. However, this record capacity from both traditional reinsurers and alternative capital markets continues to outpace reinsurance demand.
Fitch therefore expects market pricing to soften further and terms and conditions to offer growing flexibility to cedants at the 2027 renewals, as the imbalance between abundant supply and modest demand growth continues. However, returns on average equity should still be attractive in
the low-teens as reinsurers remain disciplined in deploying capital to select underwriting opportunities, potential M&A activity or returning excess capital to shareholders.
The 2026 renewals demonstrated a strong shift to a buyers’ market, particularly for property risk, where rates declined by double digits. Terms and conditions marginally loosened, although attachment points and retentions mostly held. Casualty rates largely increased to keep pace with higher loss costs from social inflation, although rate adequacy could fall in 2027.
Fitch forecasts a deterioration in combined ratios in 2027. This will be driven by continued price erosion, while easing policy terms could increase earnings volatility. Nevertheless, we expect most reinsurers to maintain underwriting discipline, resulting in lower sector revenue. Margin pressure is likely to be partly offset by overall price adequacy, improved retrocession conditions, better diversification beyond traditional cyclical reinsurance lines, and an ability to release prior-year reserves.
Challenging Renewals as Softening Continues; Terms Weaken
Fitch expects highly competitive market conditions in most property and specialty lines to drive further market softening in 2027. However, following substantial price declines over the past two years, competition is likely to become less price-led and increasingly centered on terms and conditions, which have remained resilient through most of 2026.
We expect reinsurers to show greater flexibility in negotiations by offering lower attachment points, broader coverage, and protection for more frequent return periods, including through aggregate covers. A materially elevated loss experience would likely be required to change the softening market trend.
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Fitch expects casualty pricing to be pressured at the 2027 renewals as supply is ample, particularly with growing capacity from casualty sidecars, and demand is broadly flat. Traditional carriers are generally being more cautious and have pulled back writings given expected continued casualty challenges, including U.S. reserve strengthening for soft market years (2014-2019) and exposure to managing general agents. Rate adequacy could be tested in 2027, as heightened risk from social inflation continues to push loss costs higher. This is particularly the case as casualty did not experience a rate reset similar to that of property business in 2023.