AM Best has revised its outlook for the global non-life reinsurance sector to stable from positive. The agency cited falling property reinsurance rates and a broader return to more normal market conditions.
Reinsurers have still kept stricter terms and higher attachment points. That means pricing has softened, but the market has not fully returned to the looser structures seen before the hard cycle.
Speaking at RIMS RISKWORLD in Philadelphia, AM Best associate director Dan Hofmeister said property reinsurance pricing has dropped sharply. He said rates are moving close to pre-2023 levels.
Hofmeister said rate reductions reflect stronger underwriting by primary insurers. Better underlying portfolios have reduced pressure on reinsurers and supported lower pricing.
Higher deductibles and lower exposures have also shifted more risk back to primary insurers. That is especially true for smaller catastrophe events.
As a result, reinsurers are absorbing fewer losses and focusing more on capital protection. Industry estimates show catastrophe losses borne by reinsurers have fallen by nearly half in recent years.
Casualty reinsurance remains more difficult. Hofmeister said social inflation and rising litigation costs continue to weigh on results.
Some reinsurers have reported adverse reserve development. Market views remain split on whether casualty pricing is keeping pace with claims costs.
Alternative capital remains important, especially in property reinsurance. It is increasingly deployed alongside traditional capacity.
That capital has added competition and pressured pricing. Hofmeister said the relationship between alternative and traditional capital remains mostly complementary.
AM Best does not expect the market to tighten without a major or unexpected event. Hofmeister said insured losses would need to exceed $100 bn, or more, to materially affect capital levels.
For now, reinsurers have enough capital to absorb normal volatility. The sector has moved away from the sharp hardening phase, but it has not abandoned underwriting discipline.
