Europe’s largest reinsurers reported a record 19.6% average return on equity in 2025, while Fitch Ratings pointed to a less supportive operating environment heading into 2026.
The result exceeded the previous high of 17.1% recorded in 2023. Fitch attributed the performance to sustained underwriting results across most business lines and stable investment income during favorable market conditions.
This continues a multi-year trend of elevated profitability. Goldman Sachs reported that European reinsurers exceeded their cost of equity in three of the last four years, including 2023 and 2024, supported by underwriting gains and reserve actions.
Despite the record results, external analysis indicates that current profitability levels may affect future pricing dynamics. In a January 2026 report, J.P. Morgan said reinsurance profitability remains well above historical levels, noting that a material shock would be required to reverse pricing trends.
The bank said stronger margins could weigh on pricing momentum, even as profitability is expected to remain elevated in the near term. Combined ratio guidance for 2026 is around 85% for P&C reinsurance, compared with 94% at the previous cycle peak in 2013, indicating continued underwriting profitability.
Fitch said operating conditions in 2026 are expected to be less supportive, consistent with its “deteriorating” outlook for the global reinsurance sector. Large loss events are expected to be a main factor affecting earnings, particularly if primary perils return to higher-loss years.
The agency said it expects the Iran war to generate limited and manageable losses for reinsurers, mainly affecting specialty lines. The outcome depends on the duration and scope of the conflict.
At the same time, pricing conditions have begun to ease. January 2026 renewals showed a 0-2% decline in risk-adjusted pricing, the first drop since 2017, according to Beinsure.
Total dedicated reinsurance capital reached $769bn in 2024, up 5.4% year on year, according to Gallagher Re, supported by retained earnings and continued investor participation.
The peer group’s average property and casualty reinsurance combined ratio improved to 79.8% in 2025 from 85% in 2024, reflecting improved attritional performance and lower-than-expected natural catastrophe losses, Fitch said.
This builds on prior underwriting gains. Data cited by Beinsure showed the combined ratio reached 86.3% in the previous period, supported by disciplined underwriting and relatively low large-loss activity.
Property and casualty revenue growth stalled in 2025. Fitch said reinsurers are expected to continue prioritizing profitability over growth in 2026.
Results in the life and health segment were mixed but supported by releases from contractual service margins.
The agency said recurring income is expected to support returns, assuming no material deterioration in asset quality.
European reinsurers account for about 36% of the global reinsurance market, according to AM Best, supported by diversified portfolios across geographies and business lines.
The sector has maintained financial stability over more than 15 years without major stress events, supported by regulatory frameworks and diversification strategies, Beinsure reported.
At the same time, underwriting discipline has led to tighter terms and reduced coverage for certain catastrophe risks, particularly medium-sized events, in response to higher frequency and volatility of weather-related losses.
