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Global property and casualty (P&C) reinsurers are entering the second half of 2026 from a position of financial strength, although Morningstar DBRS expects the sector to face a more competitive underwriting environment as the year progresses.
The global credit ratings agency said strong earnings, resilient investment returns, disciplined risk selection and solid capital positions should provide support, while growing reinsurance capacity and moderating property catastrophe pricing are likely to test underwriting discipline.
Morningstar DBRS added that property catastrophe rates are likely to remain under pressure ahead of the January 2027 renewals if catastrophe losses remain contained.
The company said reinsurers should nevertheless be able to absorb greater loss volatility in H2 2026, including a possible increase in catastrophe activity during the Atlantic hurricane season. A strengthening El Niño is expected to reduce the likelihood of an active season, although Morningstar DBRS cautioned that a major catastrophe or concentration of large events could change the sector’s earnings trajectory.
The company expects the competitive environment to make risk selection and portfolio management increasingly important. Property underwriting remains highly profitable, but casualty and specialty businesses face a more challenging combination of social inflation, reserve uncertainty, cyber pricing pressure and geopolitical risks. Morningstar DBRS said these pressures are likely to encourage reinsurers to favour business that meets risk-adjusted return requirements rather than pursue growth for its own sake.
Investment performance is also expected to remain an important source of earnings support. Morningstar DBRS said the combination of higher invested asset bases, elevated reinvestment rates and favourable yields should continue to provide diversification as underwriting conditions become less supportive. The company noted that reinsurers with longer-tail liabilities may have greater scope to benefit from the current investment environment, given their longer investment horizons and more predictable liability cash flows.
Morningstar DBRS said strong capital generation should provide additional flexibility through H2 2026. With solvency levels remaining healthy, reinsurers have been able to return excess capital to shareholders while retaining capacity to respond to loss events and pursue selective growth opportunities. The company expects share repurchases to remain part of capital allocation strategies as attractive underwriting opportunities become more selective.
The outlook follows a strong first half for the sector. Morningstar DBRS said eight selected global P&C reinsurers generated aggregate net income of $14 billion in H1 2026, compared with $12 billion a year earlier, representing a 16.7% increase. The company attributed the improvement primarily to strong underwriting results, relatively low catastrophe losses, favourable reserve development, disciplined portfolio management and investment income.
Property reinsurance was the strongest area of underwriting performance in the first half. Morningstar DBRS said limited catastrophe losses and reserve releases supported results, while reinsurers’ focus on risk-adjusted returns helped protect profitability despite continued price reductions. The company said reinsurers generally responded to more competitive conditions by scaling back participation in business that did not meet return expectations.
Casualty and specialty operations remained profitable but produced less robust results than property, according to Morningstar DBRS. The company noted that reinsurers continued to pursue selective growth while managing exposures more actively. Geopolitical tensions, particularly those associated with the Middle East, increased the focus on potential exposures in marine, aviation, energy, political violence and trade credit, although related losses were generally manageable during H1 2026.
Investment income provided another important contribution to first-half earnings. Morningstar DBRS pointed to higher recurring income, stronger reinvestment yields, growth in invested assets and favourable market conditions across the peer group. The company said investment portfolios have become increasingly important in supporting returns as underwriting pricing becomes less favourable.
Capital management was also a feature of H1 2026. Morningstar DBRS said strong operating earnings and capital generation allowed several reinsurers to continue buying back shares while maintaining financial flexibility. Arch Capital was among the more active repurchasers, while RenaissanceRe also continued to operate a significant buyback programme, according to the company.
Catastrophe activity remained relatively supportive during the first half. Morningstar DBRS estimated global insured natural catastrophe losses at around $46 billion, below the 10-year H1 average of $64 billion. Economic losses were approximately $142 billion, also below the 10-year H1 average of $159 billion. The company noted that five consecutive quarters had passed without a catastrophe producing more than $10 billion of insured losses.
Morningstar DBRS nevertheless highlighted the growing significance of secondary perils, particularly wildfires, whose frequency and severity it said are challenging their traditional classification as secondary risks. Severe convective storms in the US generated more than $26 billion in insured losses during H1 2026.
“The global P&C reinsurance industry remains in a strong financial position for the remainder of the year, supported by solid earnings, favourable investment income, disciplined underwriting, robust capital generation, and strong solvency levels,” added Victor Adesanya, Senior Vice President, Global Insurance & Pension Ratings.
“Although catastrophe activity could increase during the second half of the year, particularly during the Atlantic hurricane season, the industry appears well positioned to absorb loss volatility and navigate competitive market conditions while continuing to generate attractive underwriting and investment returns.”
Overall, Morningstar DBRS expects the sector to remain well capitalised through the rest of 2026. The combination of underwriting discipline, investment income, strong solvency and capital generation should provide resilience, while the main pressure points are likely to be softer property catastrophe pricing, greater competition and uncertainty across casualty and specialty lines.
The post Global P&C reinsurers head into H2’26 with strong capital but softer pricing: Morningstar DBRS appeared first on ReinsuranceNe.ws.
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