Abundant capacity and rising competition across most property lines will gradually erode prices, while rising claims costs, notably from more frequent and severe catastrophe losses and persistent social inflation, will pressure underwriting margins, in our base case, said Fitch
London/Paris/Chicago: Fitch Ratings has revised its global reinsurance sector outlook to ‘deteriorating’ from ‘neutral’ in anticipation of moderately weaker, but still sound, operational and business conditions in 2026.
Abundant capacity and rising competition across most property lines will gradually erode prices, while rising claims costs, notably from more frequent and severe catastrophe losses and persistent social inflation, will pressure underwriting margins, in our base case, said the rating agency.
“We expect capital supply from traditional and alternative sources, currently at a record high, to further outpace incremental demand from cedants over the next 12 months, increasingly shifting pricing power in favour of reinsurance buyers. More competitive market conditions will lead to continued market softening – particularly in property catastrophe – absent a very significant loss event in 2H25. Competition is likely to remain price-driven, but we anticipate policy terms will loosen from the very high standards established in 2023.” explained Fitch.
Assuming major losses remain within budgeted levels, Fitch expects combined ratios and return on equity to slightly deteriorate in 2026, primarily driven by lower pricing since mid-2024 and rising loss costs, but mitigated by preserved underwriting discipline, active portfolio optimisation and supportive investment returns.
“We expect capitalisation to remain generally very strong, providing headroom to absorb market shocks. P&C reserve buffers have generally strengthened over the past two years, enhancing balance-sheet resilience, while providing flexibility to smooth the earnings profile,” stated Fitch.