Reinsurance Sector Outlook Turns Negative Amid Rising Competition

Fitch Ratings has revised its global reinsurance sector outlook for 2026 from neutral to deteriorating, citing expectations of weaker—though still sound—business and operational conditions. According to the firm's latest report, rising capacity and heightened competition in most property lines are driving prices down, while increasing claims costs from severe catastrophes and persistent social inflation are putting pressure on underwriting margins.

The firm expects that capital from both traditional and alternative sources will continue to outpace demand from cedents through mid-2026, shifting pricing power further toward buyers. Fitch said this shift is likely to result in continued market softening, especially in the property catastrophe segment, barring any substantial loss events in the second half of 2025. Although pricing competition is intensifying, policy terms are expected to loosen moderately from the stricter conditions set in 2023.

Fitch projects that, assuming no outsized losses, combined ratios and return on equity will modestly decline next year. The deterioration will largely be driven by softening prices since mid-2024 and escalating loss costs. These pressures, however, are expected to be partially offset by continued underwriting discipline, portfolio adjustments, and steady investment income.

Despite these challenges, Fitch believes the sector remains well capitalized. The report noted that property and casualty reserve buffers have generally strengthened over the past 2 years, improving financial resilience and offering insurers the ability to smooth earnings despite market volatility.