Fitch revises global reinsurance sector outlook to Neutral

Fitch Ratings has revised its global reinsurance sector outlook to Neutral from Improving, reflecting the likely peak of the pricing cycle. Despite this shift, profitability is expected to remain robust in 2025.

Strengthened capital buffers and reserve adequacy, driven by record profits in 2023 and the first half of 2024, position reinsurers well for a potential decline in prices. This comes as claims costs rise and catastrophe losses grow due to climate change. Fitch forecasts a moderately softer and more competitive market in 2025, with a calendar-year combined ratio of 88 per cent and a near-term return on equity near 20 per cent, provided that loss activity remains average.

Fitch further notes that property catastrophe losses in the first half of 2024 exceeded $60 billion, influenced by significant peril events like US convective storms. Reinsurers absorbed less of these losses due to higher attachment points, a trend expected to continue in 2025. Climate change’s impact on weather patterns poses ongoing challenges for pricing catastrophe risk.

Capitalisation is anticipated to stay strong, surpassing reinsurers’ targets and providing resilience against potential shocks. Reserve buffers have been fortified, improving balance-sheet stability and earnings flexibility.

Attribution: Fitch Ratings

Subediting: M. S. Salama