While the ongoing Middle East conflict is likely to produce “temporary and localised” price spikes within certain specialty reinsurance lines, the overall softening trend will likely remain unless loss patterns are significantly reshaped, discouraging capital deployment, Morningstar DBRS has suggested.
A new report from the agency noted that in 2025, its selected top global property and casualty reinsurance companies (Reinsurers) delivered another strong year, reaching a record aggregate net income of $25.2 billion, up from $20.5 billion in 2024.
“Specifically, the Reinsurers reported strong underwriting profitability, benefiting from benign major catastrophe losses in 2025 while investment income was also strong,” Morningstar DBRS added.
Despite the overall softening in the market, risk-adjusted pricing remained adequate. Pricing in property catastrophe lines, however, has continued to decline in 2026 amid excess capacity, putting pressure on profit margins.
At the same time, the recent escalation of geopolitical tensions in the Middle East has driven increased pricing and volatility across several specialty lines, partially offsetting the broader softening trend.
“The ongoing conflict in the Middle East has further heightened volatility across marine, aviation, and political risks, prompting near-term repricing, particularly in war risk-related lines. However, abundant capacity and disciplined underwriting from the Reinsurers are likely to continue to push rates downward for lower‐risk businesses in the long term, making geopolitical rate spikes temporary and localised rather than structural,” Morningstar DBRS explained.
As per the agency, Reinsurers’ overall profitability is expected to remain solid but under pressure in 2026 as short‐tail pricing declines and the investment tailwind fades.
The firm’s report further observed, “The record industry capital continues to outpace the adequately priced reinsurance opportunities, driving even higher competition for high-quality risks. In addition, geopolitical risks are becoming increasingly material in 2026.
“While we believe the current Middle East conflict is likely to produce temporary and localised price spikes within certain specialty reinsurance lines, the overall softening trend will likely remain unless loss patterns are significantly reshaped, discouraging capital deployment.”
Steve Liu, Assistant Vice President, Global Insurance & Pension Ratings, added, “With narrower underwriting margins expected across many reinsurance business lines in 2026, appropriate risk selection and disciplined underwriting will become decisive differentiators for the Reinsurers’ 2026 performance.
“The current Middle East conflict is likely to produce only temporary and localized price spikes in certain specialty reinsurance lines unless the loss patterns are significantly reshaped in 2026, discouraging capital deployment.”
