Banking News — A recalibration of the global reinsurance market since the January 2023 renewal period has produced a more durable market structure, with reduced earnings volatility and stronger margins, according to AM Best’s latest Best’s Market Segment Report, “Reinsurers’ Disciplined Capital Deployment and Underwriting Remain Key Foundations.” The findings underpin AM Best’s continued positive outlook for the reinsurance industry.

The report is the first in AM Best’s annual series on the global reinsurance sector ahead of the Rendez-Vous de Septembre in Monte Carlo. Additional analyses, including global reinsurance group rankings and deep dives into insurance-linked securities, Lloyd’s, life/annuity, health, and regional markets, will be released through August and September.

The study notes that changes in how risk is priced, shared, and retained introduced during the January 2023 renewals have carried forward into 2024, delivering a second consecutive year of strong results. The European “Big Four” reinsurers posted a discounted combined ratio of 86.4% under IFRS 17, with discounting lowering the ratio by roughly eight percentage points on average. The U.S. and Bermuda composite reported an undiscounted combined ratio of 89.5% under U.S. GAAP. These figures indicate sustained underwriting profitability in the current cycle.

“Reinsurers’ risk-adjusted capitalization levels remain robust, reflecting retained earnings and disciplined capital management, and the strong underwriting profitability is being augmented by a surge in investment income given elevated interest rates,” said Michael Lagomarsino, senior director at AM Best. He added that the absence of significant new global entrants has preserved structural market discipline, setting this cycle apart from previous ones.

Despite global insured weather-related losses likely exceeding USD 100 billion in 2025 driven largely by California wildfires estimated between USD 30–50 billion most reinsurers have maintained strong performance through the first half of the year. “Assuming no further material weather events in the second half of 2025, the combination of disciplined underwriting, rate adequacy and robust investment income should deliver full-year operating results exceeding the cost of capital,” said Dan Hofmeister, associate director at AM Best.

The report also warns of persistent headwinds, including climate change, social inflation, geopolitical tensions, and trade disputes. These risks, AM Best notes, reinforce the value of the market’s improved structural foundations and justify ongoing close monitoring despite the positive outlook.

“The question now facing the industry is whether the improvements in terms and conditions represent a durable shift,” said Steven Chirico, director at AM Best. “The lessons of past cycles suggest caution, but reinsurer sentiment has ensured tighter exposure management and market discipline in the current cycle.”