Kathmandu. The global reinsurance sector is projected to face a difficult situation next year in 2027 as low prices affect results and rising claim costs.
Fitch Ratings made this estimate in its September report. The rating agency forecast a slight decline in the combined ratio and return on equity as the impact of low prices that began in mid-2024 will now be fully reflected in earnings.
Economic, social and medical inflation, the impact of climate change, and new obligations related to geopolitics and artificial intelligence (AI) will further increase claims pressures on reinsurers. “Reinsurance companies could face further price drops next year,” the report said, “although this decline could be less severe than in 2026.” ’
Fitch expects lower rates and rising claim costs to impact margins and earnings. “This impact will not be severe enough to significantly weaken the reinsurance sector’s strong capital position,” Fitch said.
Non-life insurance companies will also take more risk. This is because after the high threshold of the ‘tough market’, the retention returns to normal levels. Reinsurance companies stop absorbing a large part of the losses. Fitch says that the actuarial discipline of many global reinsurance companies, portfolio reform efforts, fund release from last year’s reserves and strong investment income will ease this pressure.
Overall, Fitch expects margins to shrink gradually rather than abruptly. “Capital strength will remain a key support for the sector through 2027 amid a weak market and rising deficit trends,” Fitch said in its report. -Agency
