Global credit rating agency AM Best has revised its outlook for the global reinsurance segment to 'Stable' from 'Positive', citing an acceleration of reductions in property reinsurance pricing and continuing challenges in the US casualty space as being among its key considerations.
In a new “Best’s Market Segment Report”, the agency says the 1 January 2026 renewal period included a drop in reinsurance rates between 10 and 20%, with the largest declines occurring on non-loss impacted accounts.
“These declines brought pricing closer to pre-2023 renewal levels, when severe market dislocation led to dramatically improved risk-adjusted pricing and stricter terms and conditions,” said AM Best Associate Director, Mr Dan Hofmeister. “At the time, that included an industry-wide retrenchment away from lower layers of property catastrophe reinsurance programmes.”
The revision of the outlook to ‘Stable’ primarily reflects increasing pressure to reduce property reinsurance pricing, which may challenge the global reinsurance segment’s ability to sustain the very strong operating performance achieved over the past three years. The 2025 calendar year also represented the sixth consecutive year of insured global catastrophe losses exceeding $100bn.
The report says that apart from the California wildfires in the first quarter of 2025, there was an absence of higher magnitude individual loss events last year. Performance in the segment has also benefitted over the past three years from higher attachment levels for reinsurance coverage secured by primary market insurers and a strategic rebalancing of reinsurers’ portfolios. “As a result, the reinsurance segment’s operating performance for 2025 is expected to generate returns that exceed its cost of capital for a third consecutive year,” said AM Best Director, Mr Greg Dickerson.
A sustained period of strong results in the sector has led to robust capital generation that has reinsurers searching for opportunities to deploy capacity. Reinsurance capacity is projected to enter 2026 at record levels: approximately $540bn in traditional dedicated reinsurance capital and $120bn in insurance-linked securities capital, bolstered by a third consecutive year of robust earnings.
The report notes that while there has been some loosening in terms and conditions, higher retentions imposed upon ceding companies in recent years have largely held, which the agency views as a favourable indication of sustained underwriting discipline, despite the declining rates for property exposures.
Life reinsurance
Separately, AM Best has revised its individual market segment outlook for the global non-life reinsurance segment to ’Stable’ from ‘Positive’, while its outlook for the global life reinsurance segment is being maintained at ‘Stable’. The global life reinsurance segment remains highly concentrated among several highly rated, diversified and well-capitalised insurers, which also have strong liquidity and risk-adjusted capital.