Morningstar DBRS said that while the ongoing conflict in the Middle East could produce “temporary and localized” price spikes within certain specialty reinsurance product lines, the overall weak trend is likely to persist unless loss patterns are significantly reshaped, hampering capital deployment.
A new report from the agency notes that its select group of the world’s top property and casualty reinsurers (Reinsurers) are set for another strong year in 2025, with total net profits reaching a record $25.2 billion, up from $20.5 billion in 2024.
Morningstar DBRS added: “Specifically, reinsurers’ underwriting profitability is strong, benefiting from benign major catastrophe losses in 2025, while investment income is also strong.”
Risk-adjusted pricing remains adequate despite overall market weakness. However, real estate catastrophe insurance pricing continues to decline in 2026 due to overcapacity, putting pressure on margins.
Meanwhile, the recent escalation of geopolitical tensions in the Middle East has led to increased pricing and volatility across multiple specialty product lines, partially offsetting broader weakness.
“Ongoing conflicts in the Middle East have further heightened volatility in marine, aviation and political risks, prompting near-term repricing, particularly in lines related to war risk. Over the longer term, however, ample reinsurer capacity and disciplined underwriting are likely to continue to depress rates for less risky businesses, making the spike in geopolitical rates temporary and localized rather than structural,” Morningstar DBRS explains.
The agency said it expects reinsurers’ overall profitability to remain solid but to come under pressure through 2026 as short-tail pricing declines and investment tailwinds fade.
The firm’s report further states, “Record industry capital continues to outstrip appropriately priced reinsurance opportunities, driving greater competition for high-quality risks. Additionally, geopolitical risks will become increasingly important in 2026.
“While we believe the current conflict in the Middle East may generate temporary and localized price spikes within certain specialty reinsurance product lines, the overall weak trend is likely to persist unless loss patterns are significantly reshaped, hampering capital deployment.”
Steve Liu, Assistant Vice President, Global Insurance and Pensions Ratings, added: “Underwriting margins are expected to tighten in 2026 across many reinsurance business lines, and appropriate risk selection and disciplined underwriting will be decisive differentiators for reinsurers’ 2026 performance.
“The current conflict in the Middle East is likely to result in only temporary, localized price spikes in certain specialty reinsurance product lines unless loss patterns reshape significantly in 2026, hampering capital deployment.”
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