Positive Outlook for Global Reinsurance: Insights from AM Best's Latest Report

AM Best's Best's Market Segment Report—Global Reinsurance maintains a positive outlook for the global reinsurance segment. This outlook is driven by robust underwriting profit margins, stable property rates, and solid capitalization across the sector.

Per the report, the global reinsurance market continues to exhibit strong performance despite losses incurred from Hurricanes Milton and Helene in the latter half of 2024. These events are expected to impact third- and fourth-quarter earnings but are unlikely to disrupt overall profitability for the year. Reinsurers are adapting to such events by focusing on higher attachment points in property reinsurance, which helps limit exposure to smaller, more frequent losses.

According to AM Best, property rates and terms remain steady, with little expectation for softening in the near term. Stable rates are supported by heightened demand for coverage spurred by increased natural catastrophe activity and broader economic uncertainty. Reinsurers are also refining their risk pricing strategies to address secondary perils such as floods and wildfires, which have grown more prominent in recent years.

The report highlights that US casualty reserves have become a key area of concern, with some reinsurers experiencing adverse reserve development stemming from earlier accident years. This trend has led to heightened scrutiny and cautious adjustments in casualty underwriting practices. Many reinsurers are strengthening their casualty loss picks and adopting a more selective approach to underwriting lines such as general liability and auto. This is expected to shape the market as it approaches the 2025 renewal season.

AM Best also noted that reinsurers achieved combined ratios of 82.3 (IFRS 17) and 85.8 (GAAP) during the first half of 2024, underscoring strong underwriting performance. These results were further supported by disciplined pricing, with reinsurers maintaining profitability even amidst an active hurricane season.

In addition to property and casualty adjustments, reinsurers are diversifying into life/annuity and health reinsurance. AM Best highlighted that these segments remain well-capitalized and positioned for growth, with reinsurers managing claims tied to elevated mortality impacts and exploring innovations like artificial intelligence to enhance underwriting practices.

Higher interest rates have bolstered investment income for reinsurers, contributing to improved total returns. Despite geopolitical tensions and uncertain economic conditions, reinsurers are expected to continue benefiting from elevated interest income over the next few years. Enhanced risk pricing discipline, supported by the higher cost of capital, has further strengthened the sector's resilience.

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