Despite expectations that reinsurance pricing will soften further in 2027 amid ample capacity from both traditional reinsurers and alternative capital providers, S&P maintains a stable outlook for the global reinsurance sector, with “strong fundamentals” expected to offset increasingly challenging near-term market conditions.
According to S&P’s latest report, rating trends support its stable sector view. The average rating of companies in its reinsurance benchmark group is at the upper end of the ‘A’ category, while the ratings outlook is stable for 85% of the benchmark group, positive for 10%, and negative for 5%.
S&P Global Ratings credit analyst Johannes Bender said, “Abundant capacity and lower-than-expected catastrophe losses in recent years suggest that reinsurance pricing will remain under pressure through 2027.
“As a result, reinsurers are likely to face increasing pressure to loosen terms and conditions, while property and casualty reinsurers’ underwriting margins and overall profitability will gradually compress over 2026-2027.”
That said, while geopolitical instability, social inflation, and natural catastrophe losses are key risks, S&P has suggested the global reinsurance sector will remain resilient over 2026-2027 due to robust capitalisation, projected profitability above the cost of capital, and strong investment results.
“We believe underwriting margins and overall profitability will remain sufficient to cover the sector’s cost of capital. This reflects still healthy P&C reinsurance combined ratios, solid net investment income, and strong life reinsurance earnings, provided annual natural catastrophe and large man-made losses remain within the annual budgets,” the rating agency added.
Against this backdrop, S&P has forecast a global reinsurance sector return on equity (ROE) of 12%-15% in 2026 and 10%-13% in 2027; an undiscounted combined ratio of 92%-95% in 2026 and 94%-97% in 2027; positive reserve releases of 1-2 percentage points; and strong net investment income, with a net investment yield of 3.5%-4.0%.
S&P additionally highlighted that the significant insurance gap in areas such as cyber, renewable energy, and data centres provides long-term opportunities.
