S&P Global Ratings, a global provider of credit ratings, research and financial analysis, expects the international reinsurance sector to remain strongly capitalised and profitable through 2026 and 2027.
The company said reinsurers should have sufficient financial strength to absorb significant losses, although the market continues to face challenges from rising claims costs, climate-related uncertainty and other sources of volatility.
In its report, Global Reinsurers Keep Natural Catastrophe Exposure Under Control, S&P Global Ratings said reinsurers have generally taken a cautious approach to expanding their exposure to property catastrophe risks. The company expects pricing in this area to continue declining, but said the capital positions of its benchmark group should remain consistent with the ratings currently assigned to the companies.
According to S&P, the combination of softer pricing and changing market conditions could lead reinsurers to reduce their appetite for catastrophe risk during 2027. Despite this, the company expects the sector’s capital base to remain sufficiently strong to absorb industry-wide catastrophe losses of more than $300 billion without breaching key capital thresholds.
S&P also expects 19 of the 20 reinsurers included in its benchmark group to retain their existing capital adequacy and earnings scores even if the industry were to experience aggregate natural catastrophe losses equivalent to a 1-in-250-year event. The company stressed, however, that the impact of such an event would vary between individual reinsurers according to their respective exposures and risk profiles.
“Ultimately, performance will depend on underwriting discipline and prudent risk appetite frameworks,” added S&P Global Ratings credit analyst Sachin Bhojani in the report. “Reinsurers that successfully balance growth ambitions with risk mitigation will be well positioned to protect capital strength and navigate the next phase of the reinsurance cycle.”
S&P said the outlook for catastrophe risk appetite is likely to become more conservative next year as pricing comes under further pressure. Alongside weaker reinsurance rates, reinsurers are dealing with claims inflation, higher US casualty losses, climate-related volatility and geopolitical uncertainty.
The company nevertheless expects reinsurers to remain profitable during 2026 and 2027, with earnings forecast to stay above the sector’s cost of capital. S&P said this combination of earnings and strong capitalisation should provide the industry with some capacity to absorb unexpected losses.
The company’s assessment of capital strength also takes into account the relationship between catastrophe exposure and available capital. S&P noted that the benchmark group’s 1-in-250-year property catastrophe exposure, measured against its total adjusted capital, was broadly unchanged in 2026 compared with the previous year.
During the January 2026 renewals, most of the global reinsurers included in S&P’s benchmark group increased their underlying 1-in-250-year net aggregate natural catastrophe exposure. The average increase was 9%, although the company said growth in capital was sufficient to offset the additional exposure. A smaller number of reinsurers reduced their underlying absolute catastrophe exposure.
S&P noted that reinsurers have continued to exercise underwriting discipline despite the decline in pricing. Strong capital positions and relatively favourable catastrophe loss experience have supported this approach. However, the company warned that the contribution from comparatively low recent catastrophe losses could diminish if prices continue to fall and underwriting margins become narrower.
This could leave reinsurers more sensitive to changes in claims and investment performance, with greater potential volatility in both earnings and capital.
Natural catastrophe losses remained relatively moderate for the global insurance industry in 2025. S&P cited figures from the Swiss Re Institute showing that insured losses reached $107 billion during the year. This was approximately 26% lower than in 2024 and around 16% below the average annual insured loss of $127 billion recorded between 2015 and 2024.
The company said the majority of losses came from secondary perils, which tend to occur more frequently but generally involve smaller individual events than major peak perils. Among the most significant events were the California wildfires and a rise in severe convective storms across the US.
There were no major peak-peril events, such as significant hurricanes or earthquakes, during the period, according to S&P Global Ratings. The absence of such events helped limit losses for the reinsurance market.
S&P also pointed to the continued strength of reinsurance attachment points, which determine the level at which reinsurers begin to cover losses. The company said these thresholds generally remained firm, limiting the losses ultimately borne by reinsurers.
At the same time, strong net investment income and continued earnings supported further capital accumulation across the sector. S&P said the combination of relatively modest catastrophe losses, investment income and earnings had helped reinsurers reach record capital levels.
The resulting strength of the sector’s balance sheets has provided reinsurers with greater capacity to absorb losses, while also contributing to the continued easing of catastrophe reinsurance pricing. S&P Global Ratings expects capital strength to remain an important factor in determining how the sector responds as market conditions become less favourable.
