Fitch Ratings, the global credit rating agency, has maintained its ‘deteriorating’ outlook on the global reinsurance sector for 2027.
According to Fitch, this reflects operating conditions that are weakening gradually from levels the agency continues to regard as sound.
Fitch attributes the outlook to its expectation of further price declines in 2027, albeit less pronounced than those seen in 2026, amid abundant capacity across the market.
The rating agency notes that this trend, combined with rising claims costs, is likely to erode margins and revenue, though not to a degree that would materially affect the sector’s very strong capital position.
Fitch observes that capital supply continues to outpace demand, resulting in buyer-friendly market conditions and intense competition among reinsurers. The agency expects the soft property market to persist into 2027 in the absence of a very large loss event, with selective loosening in terms and conditions beginning to contribute further to pricing declines.
Claims pressures, Fitch notes, continue to build as a result of economic, social and medical inflation, climate change, and emerging liabilities linked to geopolitics and artificial intelligence.
At the same time, the agency expects reinsurers to absorb a greater share of losses as primary retention levels normalise from the highs seen during the hard market. Fitch Ratings suggests these pressures, while contributing to earnings volatility, should help limit the extent of softening compared with previous cycles.
Fitch anticipates that lower pricing since mid-2024 will feed through more fully into 2027 earnings, while renewed inflationary pressure and climate change continue to lift claims costs. The agency expects this to result in a moderate deterioration in combined ratios and return on equity across the sector.
Nevertheless, Fitch Ratings expects preserved underwriting discipline, portfolio optimisation, prior-year reserve releases and supportive investment income to help offset the impact on earnings. In this environment, the agency believes that intelligent cycle management and disciplined capital allocation will be key factors differentiating individual reinsurers’ performance.
Manuel Arrivé, CFA, Director, said: “Moderately softer pricing and rising claims inflation in 2027 will increasingly weigh on underwriting margins. Supportive investment returns and prior-year reserve releases are likely to mitigate the decline in sector profitability. In this environment, intelligent cycle management and disciplined capital allocation will differentiate individual reinsurer performance.”
