Fitch Keeps Global Reinsurance Outlook Deteriorating for 2027

Fitch Ratings has maintained its "deteriorating" outlook for the global reinsurance sector in 2027, citing operating conditions that are expected to weaken gradually from still-sound levels.

The ratings agency expects reinsurance prices to decline further in 2027, although at a slower pace than in 2026, as abundant capacity continues to put pressure on the market. Combined with rising claims costs, lower pricing is expected to erode margins and revenue, though not enough to materially affect the sector's very strong capital position.

Capital supply continues to outpace demand, creating buyer-friendly market conditions and intensifying competition among reinsurers. Fitch expects the soft property market to continue into 2027 unless a very large loss event occurs. Selective loosening of terms and conditions is also beginning to add to pricing declines.

Claims pressures are building because of economic, social, and medical inflation; climate change; and emerging liabilities related to geopolitics and artificial intelligence. Reinsurers are also expected to absorb a greater share of losses as primary retention normalizes from the elevated levels reached during the hard market.

While those pressures could increase earnings volatility, Fitch said they should also help limit the extent of market softening compared with previous cycles.

Lower pricing that began in mid-2024 is expected to flow more fully into reinsurers' 2027 earnings, while renewed inflationary pressure and climate change increase claims costs. Fitch expects these factors to produce moderate deterioration in combined ratios and return on equity.

Preserved underwriting discipline, portfolio optimization, prior-year reserve releases, and supportive investment income are expected to mitigate the effect on earnings. Fitch said intelligent cycle management and disciplined capital allocation will differentiate the performance of individual reinsurers.