The rating agency noted that reinsurers continue to benefit from favorable property-catastrophe terms and higher attachment points, robust risk-adjusted capitalization and strong investment income. Returns have improved dramatically since the market turned: AM Best estimates that global reinsurance ROE reached 18.1% in 2025 and projects a still-strong 15.7% for 2026. The rolling five-year average ROE is expected to rise to 14.5% by year-end 2026, compared with just 4.5% at the end of 2021.
Performance has also remained robust across the main reinsurance centers. In 2025, the European "Big Four" recorded an 83.0% combined ratio and a 20.4% ROE, while Lloyd's reported an 87.6% combined ratio and 22.7% ROE. US and Bermuda reinsurers posted a 90.2% combined ratio and 16.8% ROE. Life reinsurance, meanwhile, continues to provide diversification and stability to earnings, with AM Best pointing to the prospective profitability support provided by contractual service margin releases under IFRS 17.
Capital availability is another source of resilience. Dedicated global reinsurance capital is projected to reach approximately USD 705 billion in 2026, comprising USD 575 billion of traditional capital and USD 130 billion of third-party capital. The ILS market has continued to expand rapidly: property catastrophe bonds outstanding increased from USD 57.2 billion at the end of 2025 to USD 64.6 billion in the first half of 2026. AM Best also highlighted growing asset-manager interest in casualty risk, reflected in the launch of several new casualty vehicles.
However, the picture is becoming more complex as competition increases. Property reinsurance pricing is softening from what AM Best still considers an adequate base, accompanied by some loosening of terms and structures. Over the next 12 months, the agency expects terms to broaden but remain tighter than before 2023, while operating results should remain solid, albeit at more moderate levels.
Casualty remains a particular concern. Despite continued rate and underwriting actions, uncertainty persists around US casualty lines, with social inflation creating pressure on both pricing and reserves. AM Best's data show 2025 combined ratios of 114.6% for other liability occurrence and 108.0% for commercial auto liability, contrasting sharply with the significant improvement seen in US property portfolios.
Another issue attracting increasing attention is the changing relationship between brokers, cedants and reinsurers. During the briefing, Greg Carter, Managing Director, Analytics, EMEA & Asia Pacific, warned about the risks associated with the growing use of broker facilities, particularly where underwriting authority is delegated. AM Best views such arrangements as potentially credit negative because reduced underwriting control can weaken visibility over individual risks, increase aggregation and concentration exposures and create additional governance challenges. The concern becomes particularly relevant as competition for business intensifies and market discipline comes under pressure.
The discussion also addressed the emergence of reshare and placement facilities, which allow portions of cedants' outward reinsurance programs to be pre-placed. While such structures can accelerate execution and give primary insurers greater leverage in arranging large programs, they are also changing traditional placement dynamics and the balance of negotiating power between cedants, brokers and reinsurers.
More broadly, AM Best identified geopolitical and macroeconomic uncertainty, climate risk, broker facilities, artificial intelligence and emerging liability among the major global risks facing the industry. AI is becoming particularly relevant from a liability perspective, as the growing use of algorithmic decision-making and autonomous systems raises new questions about accountability, discrimination and the allocation of responsibility when technology fails. These exposures will increasingly require insurers and reinsurers to understand where liability sits and how it should be reflected in underwriting and contractual language.
Climate-related exposures remain another important test. AM Best pointed to the elevated frequency and severity of weather-related events as a headwind for the sector. For the coming year, its baseline assumes a normal catastrophe load, with catastrophe events expected primarily to generate earnings volatility rather than threaten capital — an important distinction given the industry's current capitalization.
Overall, AM Best described the market as "past peak, fundamentally strong." Yet the stable outlook is not unconditional. A shift to negative could result if rate reductions push pricing below adequate levels, terms loosen broadly alongside lower attachment points and greater aggregate capacity, adverse reserve development erodes capital, major weather losses expose structural weaknesses, or expected ROE falls to or below the cost of capital.
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