JP Morgan said European reinsurance profitability is well above historical levels, meaning a major shock would be needed to reverse the current trend in reinsurance prices.
In a recent report, JPMorgan described the reinsurance industry’s strengthening profitability as a “blessing and a curse.”
This means profits remain high and will have to fall further to return to the previous point in the cycle. But if worse-than-expected loss experience drives pricing direction, higher margins could also act as headwinds to more positive near-term pricing trends.
JPMorgan analysts expect European reinsurance companies’ profitability to remain high in the coming years. However, given the profitability of the industry, it may take a larger loss or series of losses to reverse the current weak market environment.
JPMorgan explained: “If we compare combined ratio guidance and its development, we can clearly see that underwriting profitability has been much stronger since 2023, with average combined ratio guidance for P&C Reinsurance at 85% in 2026 compared to the last peak of 94% in 2013.
“This means that for reinsurers to see their underwriting profitability slide into the red, losses would need to be more than 15 percentage points higher than expected to reach that level.”
For context, 2017 catastrophe losses for the largest reinsurers were about 15 percentage points above budgeted levels. Even without the benefit of reinsurer discounts, average combined ratio guidance for 2026 would be around 92.5%, still more profitable than the 2013 peak of 94%, JPMorgan said.
The analysts added: “At this stage, it is difficult to say when the current weak market conditions will ease, and the industry is expected to achieve strong profit levels again in 2026.”
