Lower catastrophe losses are adding pressure on property and casualty margins through 2027.
S&P Global Ratings expects reinsurance pricing to soften further into 2027, driven by an abundance of capital from both traditional reinsurers and alternative providers.
The credit rating agency forecasts that underwriting performance and overall profitability across the sector will gradually decline over the 2026-2027 period.
Lower-than-expected catastrophe losses in recent years and high market capacity are putting downward pressure on pricing.
As a result, property and casualty reinsurers face increasing pressure to relax contractual terms and conditions whilst managing compressed profit margins.
Despite risks stemming from geopolitical instability, social inflation, and natural disasters, S&P Global Ratings maintains a stable outlook for the global reinsurance sector.
Resilience is supported by strong capital levels, high investment yields, and projected returns above the cost of capital.
If catastrophe losses stay within budgeted estimates, the sector is expected to earn returns above its cost of capital for a fifth consecutive year.
Long-term growth opportunities also remain in expanding markets such as cyber insurance, renewable energy, and data centres.
An accompanying survey by S&P found that reinsurers are actively implementing artificial intelligence, primarily in support functions, process automation, and risk management.
However, security, data privacy, model transparency, and supply chain vulnerabilities remain the principal challenges to wider AI adoption.