Global reinsurers' profitability will decline but remain strong in 2026, as 1 January contract renewals confirmed further reductions in risk-adjusted prices across most lines, Fitch Ratings says. This aligns with its 'deteriorating' sector outlook for global reinsurance, reflecting moderately weaker, but still sound, operating and business conditions in 2026.
Record-high capital supply from traditional and alternative sources again outpaced incremental demand from cedants on 1 January. This shifted pricing power towards buyers, most notably in property and, to a lesser extent, in specialty, while casualty remains more balanced. Reinsurers’ moderate property catastrophe loss experience supported softer pricing. This was driven by a quiet Atlantic hurricane season, losses from the California wildfires remaining within rating sensitivities, and lower reinsured loss share than in prior years.
Overall pricing has reverted broadly to 2022 levels and remains well above the 2018 trough. Property catastrophe and retrocession rates fell by 10%-20% on loss-free placements. Specialty had modest decreases, although cyber was down by 15%-25% and aviation was only marginally higher. US casualty renewals were broadly stable, while international casualty declined by high single digits.
Heightened pricing competition has been accompanied by terms and conditions beginning to ease from the very high standards set in 2023. Reinsurers are more willing to provide protection at lower attachment points and for more frequent return periods, including for aggregate treaties, while coverage has expanded moderately. Competition is likely to remain price-driven in 2026, but we expect policy terms to loosen further at forthcoming renewals, absent a major macro or sector-specific shock.
Fitch expects combined ratios and return on equity to deteriorate slightly in 2026, assuming major losses stay within budgets, driven by lower pricing and rising loss costs. This will be mitigated by preserved pricing adequacy, still-tight terms relative to historical norms, and supportive investment returns.
Revenue growth will slow as prices and volumes fall, with reinsurers prioritising diversification and profitability over expansion and, in some cases, being unable to deploy capital as planned. Global data centre construction and cyber risk, as well as structured solutions, are key growth areas in 2026 and beyond.
The global market remains amply capitalised. Reinsurance capital was expected to reach a record high at end-2025, up by about 30% from its 2022 low. Growth is supported by traditional capital – underpinned by robust retained earnings – and alternative capital, particularly catastrophe bonds and sidecars.
Alternative investment managers’ recent expansion into Lloyd’s syndicates and US casualty sidecars adds a new wave of third-party capital. Fitch expects reinsurer capitalisation to remain very strong and supportive of ratings, exceeding stated targets and providing sufficient headroom to absorb market shocks.