Reinsurance faces margin erosion in 2027 as prices decline and claims mount

Claims pressure will continue to build, Fitch Ratings said.

The global reinsurance sector faces a deteriorating outlook in 2027, with further price declines and rising claims costs, said Fitch Ratings.

“We expect lower pricing since mid-2024 to feed through more fully into 2027 earnings, while renewed inflation pressure and climate change lifts claims costs. This is likely to result in moderate deterioration in combined ratios and return on equity,” the credit rating agency said in a September commentary.

Claims pressures will continue to build from economic, social and medical inflation, climate change, and emerging liabilities related to geopolitics and artificial intelligence (AI), Fitch said.

Reinsurers also face further price declines, although less pronounced than in 2026.

“This, alongside rising claims costs, will lead to margin and revenue erosion, although not enough to materially affect the sector’s very strong capital position,” Fitch Ratings said.

Reinsurers are likely to absorb a higher share of losses as primary retention normalizes from hard-market highs, it added.

Helping mitigate negative effects on earnings would be global reinsurers’ preserved underwriting discipline, portfolio optimisation, prior-year reserve releases, and supportive income, said Fitch.