Supportive investment income is expected to help returns stay at or above the cost of capital.
The global non-life reinsurance market is expected to have a stable outlook, with reinsurers remaining financially strong despite the property reinsurance market moving past its peak pricing cycle.
In its Best’s Market Segment Report, “Market Segment Outlook—Global Non-Life Reinsurance”, AM Best said strong performance since 2023 has generated robust organic capital, giving reinsurers capacity to return capital to shareholders or deploy it into new business.
Whilst reinsurance pricing has eased from the peak of the prolonged hard property market, reinsurers have largely maintained underwriting discipline, including higher attachment points and tighter terms and conditions.
AM Best said projected margins have narrowed, but property exposures are still being priced above technical adequacy on an aggregate basis.
“Balance sheet strength across the non-life reinsurance segment is favourable from a credit perspective, although the imbalance created by abundant capacity, partially offset by growth in demand for reinsurance, has been a primary driver of pricing erosion in property and property catastrophe lines of business,” said Michael Lagomarsino, senior director at AM Best.
The segment continues to face risks from social inflation, more frequent and severe weather events, and geopolitical and macroeconomic uncertainty.
Over the next 12 months, AM Best expects record levels of capital, continued underwriting discipline and supportive investment income to keep returns at or above the cost of capital, allowing reinsurers to maintain profitability.