As per a new commentary from Morningstar DBRS, the reinsurance market has seen rapid growth in available capital, which reflects both retained earnings and the growing role of third-party capital, including insurance-linked securities, which has added competitive pressure to pricing but also broadened the industry’s financial foundation.
“The rapidly growing reinsurance market capital, which includes capital from Reinsurers as well as third-party capital, deployed through capital market instruments such as insurance-linked securities, has fostered more competition in the market, suppressing prices,” commented Steve Liu, Assistant Vice President, Global Insurance & Pension Ratings.
Liu added: “However, we believe that Reinsurers will maintain pricing discipline with a focus on risk selection to ensure profitability is maintained in the medium term.”
Moreover, analysts from Morningstar DBRS also highlighted that global property and casualty reinsurers managed to turn in solid results in the first half of 2025 despite facing record-breaking catastrophe losses.
The company observed that its group of leading reinsurers generated an aggregated net income of $12.0 billion, which is only marginally lower than the $12.5 billion reported in the previous year, highlighting the industry’s robustness despite facing heavy claims activity.
Morningstar DBRS also noted that underwriting profitability remained sound overall, though reinsurers’ average combined ratio deteriorated to 87.6% from 83.7% in the first half of 2024.
As per the firm, the increase reflected significant natural catastrophe losses, particularly from the January wildfires in California and severe thunderstorm activity across the United States.
Additionally, Morningstar DBRS affirmed that property catastrophe reinsurance continues to attract strong demand, and while overall market pricing has softened slightly, terms and conditions have tightened.
Regions that have recently sustained large losses, such as California and Florida, are still witnessing increases in rates. Legislative changes in Florida have also prompted numerous reinsurers to enhance their capacity within the state, which may lead to heightened competition and a moderation of pricing in upcoming renewals.
Morningstar DBRS also pointed towards climate risk as the most significant ongoing challenge for the sector.
The firm cited reinsurance broker Gallagher Re’s estimate that insured catastrophe losses totalled $82 billion globally in the first half of 2025, setting a new half-year record.
“Responding to the elevated risks, reinsurers have introduced tighter terms and conditions (including higher attachment points) to mitigate the impact of natural catastrophe losses, especially for more frequent mid-size events, although those have been somewhat muted thus far in 2025,” Morningstar DBRS said.
However, the rating agency warned that the combination of more destructive wildfires across Europe, as well as an above-average Atlantic hurricane season could wind up creating additional strain in the second half of the year.
Lastly, Morningstar DBRS confirmed that its outlook for the global P&C reinsurance market remains stable, noting that the solid H1’25 operating results indicate that U.S. trade policy, global geopolitical tension, and macroeconomic uncertainty have not “materially impacted” reinsurers’ operational environment thus far, aside from significant foreign exchange volatility.
“The upward trending natural catastrophe losses could potentially cause large losses for Reinsurers but are currently effectively managed by stricter terms and conditions, adequate pricing, and ample capital,” the firm added.
