S&P Global Ratings expects most reinsurers to stay within their annual natural catastrophe budgets and deliver solid performance throughout 2025, noting that the industry is on track to exceed its cost of capital for the third consecutive year (2023-2025) and in 2026.
In its “Global Reinsurance Industry Outlook 2026,” Standard & Poor’s stated that it maintains a stable view on the global reinsurance industry, driven by strong capital positions, resilient underwriting profits, strong investment income, and earnings expected to remain above reinsurers’ cost of capital through 2026.
The assessment also reflects the ratings agency’s views on credit trends, industry-wide risks and emerging risks over the next 12 months.
S&P noted that effective January 1, 2026, reinsurance renewal pricing has declined significantly, particularly for property and property catastrophe (short-tail) lines, and to a lesser extent casualty lines.
The market has entered the renewal season, with significant excess capacity. As of September 30, 2025, global reinsurance capital reached a record high of US$760 billion, and is expected to rise further by the end of the year, driven by strong operating profits.
A lull in the 2025 U.S. hurricane season, coupled with growing interest in insurance risk from third-party capital providers, has exacerbated the highly competitive environment in 1.1.
S&P said: “Excess short-tail capacity shifted bargaining chips to buyers, causing renewal rates to fall by 10%-20% on January 1. Attachment points remained high and largely unchanged, reflecting structural changes from early 2023, while pressure on terms and conditions allowed cedants to regain some coverage.”
Despite the devastating California wildfires in early 2025, the reinsurance industry’s overall natural catastrophe losses for the full year remained below the 10-year average, with the primary market once again absorbing much of the increased secondary catastrophe activity.
However, S&P emphasized that continued weakness in market conditions poses increasing risks and could reduce the reinsurance industry’s profit margins, especially as global natural catastrophe losses continue to exceed $100 billion annually and U.S. casualty lines continue to be under pressure.
