Reinsurance companies experienced a boom in profits during the first half of 2026, driven by a sharp decline in catastrophe losses and a rise in investment income. Non-life reinsurers tracked by Fitch Ratings reported an impressive combined ratio of 86.1% in 1H26, a notable improvement from 92.7% in 1H25. This improvement was largely attributed to a reduction in catastrophe contributions, which fell from 10.9 percentage points to 3.5 percentage points year-over-year. Consequently, net income return on equity rose to 18.2% from 17.7% in the same period a year prior, excluding Berkshire Hathaway. This financial strength has led to a significant increase in capital returned to shareholders, with common share repurchases reaching $13.1 billion in 1H26, up from $4.4 billion in 1H25, as organic growth opportunities narrowed.
Global insured natural catastrophe losses were considerably lower in the first half of 2026, totaling $44 billion according to Munich Re and $46 billion according to Gallagher Re. This is a substantial decrease compared to $95 billion in 1H25 and well below the 10-year average of $64 billion. The dominant events were US and Canadian winter storms and severe convective storms, with a quiet Atlantic hurricane season. However, the market is showing signs of softening, with non-life reinsurance net premiums written falling by 6% in 1H26, marking the first year-on-year contraction since 2015. This decline is due to pricing reductions, non-renewals, and reduced line sizes, with Europe's largest reinsurers like Munich Re and Hannover Re reporting significant decreases in net premiums written.
Despite the strong first-half results, industry experts like Fitch anticipate further market softening and looser terms at the 2027 renewals, as excess reinsurance supply continues to outpace demand. While returns are expected to remain above the cost of capital, profitability will increasingly rely on underwriting discipline rather than favorable market conditions. Property catastrophe rates experienced double-digit declines at mid-year 2026 renewals, while casualty rates generally held steady or slightly increased. However, Fitch warns that rate adequacy in casualty lines could be tested in 2027 due to persistent social inflation. The accelerated return of capital to shareholders, with a projected payout ratio of 75% for the full year 2026, underscores the industry's significant accumulated profits from the previous hard market cycle and the current environment of narrowing organic growth.
