Record levels of reinsurance capital supply from traditional and alternative sources outpaced incremental demand from buyers at the January 1st, 2026, renewals, and as pricing “reverted broadly to 2022 levels”, analysts at Fitch Ratings expect global reinsurers’ profitability to decline but remain strong in 2026.
Reinsurance broker reports revealed further price softening across most lines at the key 1.1 reinsurance renewals, with property catastrophe and retrocession rates down by 10%-20% on loss-free placements, alongside modest declines in specialty, a more stable US casualty market, and high single digit declines in international casualty.
“This aligns with our ‘deteriorating’ sector outlook for global reinsurance, reflecting moderately weaker, but still sound, operating and business conditions in 2026,” says Fitch Ratings.
Fitch shifted its outlook on the global reinsurance sector to ‘deteriorating’ from ‘neutral’ back in September 2025, and at the time said that competitive conditions would continue market softening.
For the year ahead, the rating agency still expects competition to remain price-driven, but importantly, expects policy terms to loosen further at forthcoming renewals, absent a major macro or sector-specific shock.
The so-called property market reset in 2023 pushed up rates considerably in the catastrophe space, but as important to reinsurers was the tightening of terms and conditions and move away from secondary peril losses and aggregate covers to mitigate volatility.
But as noted by Fitch, heightened pricing competition at 1.1 was accompanied by terms and conditions beginning to ease from the 2023 standards, with analysts stating that sellers “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.”
As a result of the price softening and rising loss costs, Fitch expects reinsurers to produce weaker combined ratios and return on equity in 2026 when compared with 2025, assuming major losses stay within budgets.
“This will be mitigated by preserved pricing adequacy, still-tight terms relative to historical norms, and supportive investment returns,” adds Fitch. “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.”
Reinsurance broker 1.1 renewal reports also highlight record levels of capital in the industry, which Fitch says was expected to hit a record high at year-end 2025, increasing by some 30% from its low in 2022.
“Alternative investment managers’ recent expansion into Lloyd’s syndicates and US casualty sidecars adds a new wave of third-party capital. We expect reinsurer capitalisation to remain very strong and supportive of ratings, exceeding stated targets and providing sufficient headroom to absorb market shocks,” concludes Fitch.
