As the global reinsurance market enters a period of sustained profitability and stability, disciplined capital deployment and strong underwriting remain crucial, a recent AM Best report has revealed.
The Best’s Market Segment Report, “Reinsurers’ Disciplined Capital Deployment and Underwriting Remain Key Foundations,” highlights a significant market recalibration that began in early 2023.
This shift has led to a more durable market structure with stronger margins and reduced earnings volatility, supporting AM Best’s positive outlook for the industry.
According to the report, which has been published ahead of the Rendez-Vous de Septembre in Monte Carlo, the shift since the January 2023 renewal in how risk is priced, shared and retained across the reinsurance industry has carried forward and translated into a second-straight year of solid results in 2024.
European “Big Four” reinsurers reported a discounted combined ratio of 86.4% under IFRS 17, while the US and Bermuda composite saw an undiscounted combined ratio of 89.5% under US GAAP.
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These figures, AM best noted, confirm that underwriting profitability has not only rebounded but is being sustained in the current reinsurance cycle.
Michael Lagomarsino, senior director, AM Best, said: “Reinsurers’ risk-adjusted capitalization levels remain robust, reflecting retained earnings and disciplined capital management, and the strong underwriting profitability is being augmented by a surge in investment income given elevated interest rates.
“The absence of material new global reinsurance entrants also is ensuring that structural market discipline is maintained, distinguishing the current environment from previous market cycles.”
Despite facing significant global weather-related insured losses, estimated to top USD 100 billion in the first half of 2025, the industry’s strong performance has held up, the report stated.
Those losses were primarily driven by the California wildfires, which many reinsurers are marking in the range of USD 30-50 billion.
“Assuming no further material weather events in the second half of 2025, the combination of disciplined underwriting, rate adequacy and robust investment income should deliver full-year operating results exceeding the cost of capital,” said Dan Hofmeister, associate director, AM Best.
While the market’s foundations have improved, the report cautions that reinsurers still face headwinds beyond climate change, including social inflation, growing geopolitical tensions, and trade disputes.
These challenges underscore the importance of the market’s improved structural foundations and explain why AM Best’s outlook, though positive, remains closely scrutinized, the agency stated.
“The question now facing the industry is whether the improvements in terms and conditions represent a durable shift,” said Steven Chirico, director, AM Best. “The lessons of past cycles suggest caution, but reinsurer sentiment has ensured tighter exposure management and market disciple in the current cycle.”
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