Analysts at Fitch Ratings highlighted how record amounts of reinsurance capital supply from both traditional and alternative sources exceeded the slight demand increase from buyers during the January 1, 2026 renewals, driving a softening market but one they feel can still deliver profits.Various reinsurance broker reports revealed further price softening across most lines at the January renewals.However, with pricing seen as now having largely returned to 2022 levels, analysts anticipate that while global reinsurers’ profitability will decrease, it will still remain robust in 2026.while high single digit declines were also seen in international casualty.

“Record-high capital supply from traditional and alternative sources again outpaced incremental demand from cedants on 1 January.This shifted pricing power towards buyers, most notably in property and, to a lesser extent, in specialty, while casualty remains more balanced.Reinsurers’ moderate property catastrophe loss experience supported softer pricing.

This was driven by a quiet Atlantic hurricane season, losses from the California wildfires remaining within rating sensitivities, and lower reinsured loss share than in prior years,” commented Fitch Ratings.Analysts confirmed that this aligns with the agency’s deteriorating sector outlook for global reinsurance, reflecting moderately weaker, but still sound, operating and business conditions in 2026.Moreover, reinsurance broker 1/1 renewal reports highlighted record levels of capital in the reinsurance sector, which Fitch says was expected to hit a record high at year-end 2025, increasing by some 30% from its low in 2022.

“Growth is supported by traditional capital – underpinned by robust retained earnings – and alternative capital, particularly catastrophe bonds and sidecars,” says Fitch Ratings.Artemis recently reported that As well as this, the outstanding market for  has continued to grow at at a rapid pace, with the latest estimate from Aon Securities putting invested capital in sidecar vehicles at a new high of $19.6 billion.“Alternative investment managers’ recent expansion into Lloyd’s syndicates and US casualty sidecars adds a new wave of third-party capital.

We expect reinsurer capitalisation to remain very strong and supportive of ratings, exceeding stated targets and providing sufficient headroom to absorb market shocks,” added Fitch.Looking at the year ahead, Fitch still expects competition within the reinsurance market to remain price-driven, but importantly, expects policy terms to loosen further at forthcoming renewals, absent a major macro or sector-specific shock.The property market reset in 2023 materially pushed up rates in the catastrophe space.

However, equally crucial for reinsurers was the tightening of terms and conditions, along with a shift away from secondary peril losses and aggregate covers to reduce volatility.However, as Fitch highlighted, heightened pricing competition at January 1, was accompanied by terms and conditions beginning to ease from the high standards that were set in 2023.“Reinsurers are more willing to provide protection at lower attachment points and for more frequent return periods, including for aggregate treaties, while coverage has expanded moderately,” Fitch noted.

Fitch also indicated that, as a result of prices softening and rising loss costs, the agency anticipates that reinsurers will produce weaker combined ratios and return on equity in 2026, in comparison to 2025, provided that major losses remain within budgets.“Revenue growth will slow as prices and volumes fall, with reinsurers prioritising diversification and profitability over expansion and, in some cases, being unable to deploy capital as planned.Global data centre construction and cyber risk, as well as structured solutions, are key growth areas in 2026 and beyond,” Fitch added..

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