The global reinsurance segment’s outlook has shifted from positive to stable, according to AM Best, a significant change driven by a return to pre-2023 property reinsurance pricing trends. This adjustment reflects a notable double-digit decline in property reinsurance rates, with prices falling between 10 and 20 percent for some accounts. The rating agency’s report indicates that while high retentions remain a factor, the broader market is seeing a softening in pricing and a loosening of certain terms and conditions, signaling a move away from the hard market conditions experienced in recent years.
This evolution in the reinsurance market is a key development for industry stakeholders. The shift in outlook is primarily attributed to the increasing pressure on reinsurers to reduce property reinsurance pricing. This may present challenges for the segment’s ability to maintain the strong operating performance observed over the past three years. However, AM Best clarifies that property exposures are generally still being priced at levels that suggest technical adequacy on average, offering some reassurance amidst the changing landscape.
Featured snippet paragraph: What is the primary reason for the shift in the global reinsurance segment’s outlook? The primary reason for the shift from a positive to a stable outlook by AM Best is the significant pressure on reinsurers to reduce property reinsurance pricing, which is returning to pre-2023 levels.
Dan Hofmeister, associate director at AM Best, noted that these rate declines have brought pricing closer to pre-2023 renewal levels. This period was characterized by severe market dislocation, leading to dramatically improved risk-adjusted pricing and stricter terms and conditions. At that time, the industry saw a broad retrenchment away from the lower layers of property-catastrophe reinsurance programs.
Despite the pricing drops, global insured catastrophe losses have exceeded $100 billion for the sixth consecutive year in 2025. Nonetheless, the reinsurance segment’s 2025 returns are still projected to exceed its cost of capital for the third year in a row. This resilience is largely due to the higher attachment points implemented over the past three years.
The sustained period of strong financial results has led to robust capital generation within the reinsurance sector. This has prompted reinsurers to actively seek opportunities to deploy their capacity, with traditional dedicated reinsurance capital reaching approximately $540 billion and an additional $120 billion from Insurance-Linked Securities (ILS) capital.
Furthermore, reinsurers’ investment portfolios continue to benefit from the elevated interest rates of recent years. Even with the uncertainty surrounding future interest rate movements, most non-life portfolios are structured with a three- to five-year duration. This positioning allows reinsurers to earn relatively high levels of interest income for several more years, providing a durable financial tailwind.
On the casualty reinsurance front, persistent challenges like social inflation continue to be a concern. These factors prompted several reinsurers to strengthen their casualty reserves in 2024 and 2025, a trend AM Best anticipates will continue into 2026.
In some instances, unfavorable loss reserve development in long-tail lines has been counterbalanced by favorable development from property, specialty, and workers’ compensation reserve releases. However, the buffer provided by potential excess reserve positions in other lines may be diminishing, adding another layer of complexity to the casualty market.
AM Best also highlighted rate hikes and reduced limits in volatile lines of business. Despite these measures, systemic risks remain unresolved. The rating agency questions whether the significant pricing gains seen over the past few years are truly keeping pace with evolving loss cost trends.
The casualty insurance and reinsurance business is identified as a fragile area of opportunity. It presents a delicate balance between investor appetite for diversification and the mounting volatility inherent in the market.
What is the outlook for casualty reinsurance?
