S&P Global Ratings maintains a stable outlook for the global reinsurance sector in 2026-2027, despite the expectation of further price reductions in 2027. The agency considers that the high capacity available, from both traditional reinsurers and alternative capital, should continue to pressure prices and contract terms. Financial fundamentals remain solid, with 85% of companies in S&P's reference group having stable outlook, 10% positive and only 5% negative, and the average rating is at the upper end of the "A" category.
The pressure should be reflected mainly in technical margins. S&P forecasts that global reinsurer ROE will be between 12% and 15% in 2026, declining to 10% to 13% in 2027. The P&C combined ratio is expected to move from 92%-95% this year to 94%-97% in 2027. Despite this gradual deterioration in profitability, the agency estimates that results will remain above the cost of capital, supported by net investment returns of 3.5%-4.0% and positive reserve releases.
The main challenge for the sector will be to grow in a market with excess capacity without sacrificing technical discipline. The combination of lower prices, pressure to flexible terms and social inflation could progressively reduce margins, while geopolitical instability and the frequency of climate events continue to represent relevant risks. The opportunity will be to use capital and capacity to gain market share in segments where risk is adequately rewarded.
S&P also identifies important growth pockets associated with the high insurance gap, namely in cyber risk, renewable energy and Data Centers. These segments should benefit from growing investment in digitalization, artificial intelligence and climate transition. Specialization, innovation and the ability to assess complex risks may become more important than simply increasing capacity, S&P concludes.
