
AM Best sees reinsurance outlook supported by strong capital
The absence of significant new market entrants has helped maintain market discipline.
The global reinsurance market has maintained stronger margins and reduced earnings volatility since the January 2023 renewal period, supporting its positive outlook on the sector, AM Best said in a report.
The ratings agency noted that reinsurers’ capital positions remain strong, aided by retained earnings, disciplined capital management, and higher investment income from elevated interest rates.
The absence of significant new market entrants has helped maintain market discipline compared to previous cycles.
Most global reinsurers have sustained strong performance into the first half of 2025 despite weather-related insured losses expected to exceed $100b, driven largely by California wildfires estimated at $30b to $50b.
AM Best said that, barring major new weather events, the combination of disciplined underwriting, adequate rates, and strong investment income should produce full-year returns above the cost of capital.
However, the sector continues to face challenges from climate change, social inflation, geopolitical tensions, and trade disputes.
AM Best said these headwinds highlight the importance of maintaining tighter exposure management and discipline to ensure recent market improvements prove lasting.