Fitch expects competition to intensify as supply outpaces demand, with further price softening and slight loosening of terms and conditions at the upcoming renewals, although underwriting discipline should persist.
Chicago/Paris/London: Global reinsurers’ profitability is likely to remain robust into 2026, but there are clear signs that the strong revenue growth of recent years is fading as the reinsurance cycle turns, Fitch Ratings said.
The sector is moving past the peak of the hard market, with premium growth constrained by market softening as both traditional and alternative capital reached record highs.
Fitch expects competition to intensify as supply outpaces demand, with further price softening and slight loosening of terms and conditions at the upcoming renewals, although underwriting discipline should persist.
Many reinsurers are increasingly selective, emphasising profitability over growth, and refusing business that does not meet tightened risk-return thresholds, especially in US property and casualty lines. Resilience will depend on strong underwriting discipline and prudent cycle management as competitive pressures build.
Non-life net premiums written for the global peer group declined by 0.3% year on year in 1H25 despite robust profitability, and average revenue fell by 2.7% for leading European reinsurers at the July renewals, reversing last year’s growth.
This reflected price reductions, volume declines and deliberate portfolio pruning. Property catastrophe rates fell at mid-year 2025 renewals, especially in higher, loss-free layers where capacity is abundant. Terms and conditions loosened modestly, but most reinsurers maintained prudent attachment points and limited exposure to frequency risks. Fitch expects pricing pressure to persist, although risk-adjusted returns are likely to remain above the cost of capital in 2026.
Capital management will remain a key theme as organic growth opportunities diminish. Excess capital is increasingly being returned to shareholders through higher dividends and share buybacks, and Fitch expects this to accelerate if the hurricane season remains mild. Major European reinsurers’ solvency ratios remain above target ranges, supporting sector stability.
The four largest European reinsurers – Munich Re, Swiss Re, Hannover and SCOR – posted a record average return on equity of 21.1% in 1H25, driven by strong underwriting and investment returns. Global non-life net income return on equity was 17.7% (excluding Berkshire Hathaway), with all companies reporting positive net income.
The average property and casualty combined ratio for the leading European reinsurers was a record low 81.5% in 1H25, reflecting healthy attritional performance and a low natural catastrophe loss ratio, supported by previous rate increases and stable terms. Reserve prudency increased, with most leading reinsurers building up buffers. Catastrophe losses were heightened globally, mainly due to the unprecedented Los Angeles wildfires, with large global diversified reinsurers less affected than some Bermudian reinsurers.
Investment income remains a key contributor to profitability, with recurring yields of about 3.5% and reinvestment yields of 4.0%–4.5%. Alternative capital, led by catastrophe bonds, continues to expand, intensifying competition.
Life and health reinsurance posted a 15% year-on-year rise in pre-tax income, supported by normalising mortality trends and investment earnings. However, overall revenue declined by 2%, with some reinsurers reporting decreases in net premiums earned.
Fitch’s in-depth analysis of global and European reinsurers’ 1H25 results is available in the recently published reports Global Reinsurance Monitor: Mid-Year 2025 and European Reinsurance Monitor: 1H25.