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S&P expects reinsurance sector capital strength through 2027
S&P forecasts reinsurers can absorb industry-wide catastrophe losses of more than $300 billion without breaching key capital thresholds, even as pricing declines.
S&P Global Ratings expects the international reinsurance sector to stay strongly capitalised and profitable through 2026 and 2027, despite ongoing headwinds including rising claims costs and climate-related uncertainty.
In a report on natural catastrophe exposure, S&P said reinsurers have generally kept a cautious approach to expanding property catastrophe risk. It expects catastrophe pricing to continue declining, and warned that softer pricing and changing market conditions could prompt reinsurers to reduce catastrophe risk appetite during 2027.
S&P said the sector should remain able to absorb aggregate natural catastrophe losses exceeding $300 billion without breaching key capital thresholds. It also projected that 19 of the 20 reinsurers in its benchmark group would keep their capital adequacy and earnings scores even under loss levels comparable to a 1-in-250-year event, though outcomes would vary by individual exposure and risk profile.
The ratings firm added that the outlook for catastrophe risk appetite is likely to grow more conservative next year as pricing comes under further pressure. It pointed to claims inflation, higher US casualty losses, climate-related volatility and geopolitical uncertainty as factors, while still forecasting earnings to remain above the sector cost of capital.
“Ultimately, performance will depend on underwriting discipline and prudent risk appetite frameworks,” S&P Global Ratings credit analyst Sachin Bhojani said, adding that reinsurers balancing growth ambitions with risk mitigation should be positioned to protect capital strength through the next phase of the reinsurance cycle.