Fitch Ratings has maintained a negative outlook for the global reinsurance sector in 2027. The agency anticipates a gradual weakening of operating conditions, while the overall efficiency of the sector will remain high.
Key factors influencing the forecast
Key factors affecting the market include further declines in reinsurance prices and rising claims expenses. According to the agency, the price decline in 2027 will be less pronounced than in 2026, but excess capital will continue to intensify competition among reinsurers. Furthermore, the supply of capital will remain higher than demand, creating favorable conditions for buyers.
Fitch expects the soft market in property reinsurance to persist in 2027, provided there is no major catastrophic loss. Moreover, selective softening of contract terms may contribute to further price decreases.
Pressure on expenses and financial results
Pressure on claims costs will increase due to inflation in the economic, social, and medical sectors, climate change, as well as new obligations related to geopolitical risks and artificial intelligence. Simultaneously, reinsurers are likely to assume a larger share of losses as insurers normalize their risk retention levels after the high levels observed during a hard market.
According to Fitch's forecasts, the price decline observed since mid-2024 will have a more significant impact on the financial results of reinsurers in 2027. Renewed inflationary pressure and climate change could create additional strain, potentially leading to a moderate deterioration in combined ratio and return on equity.
Nevertheless, underwriting discipline, portfolio optimization, release of past years' reserves, and favorable investment income should mitigate the impact of these factors on profitability. Under these conditions, Fitch noted that the results of individual reinsurers will depend on effective management of the insurance cycle and disciplined capital allocation.