Global reinsurers well-positioned to face investment volatility and Nat CATs
Source: Middle East Insurance Review | May 2025
Global reinsurers will see a limited hit from declines in global equity markets related to tariffs given their conservative investment portfolios, S&P Global Ratings said in a recent report titled, ‘Global Reinsurers Stand Strong Amid Investment Volatility and Natural Disasters’.
However, the sector will face exposure to equity market losses in the short term, potential asset impairments in the medium term and challenges in the longer term from the potential effects on illiquid holdings such as real estate and private debt and equity. Another focus area includes claims costs, which may be influenced by the announced tariffs.
Current equity market volatility follows an already bumpy start to the year, with the January 2025 California wildfires resulting in estimated industry insured losses of up to $50bn. Reinsurers are expected to absorb a substantial portion of these costs within their annual earnings, reducing the catastrophe budget available for the remainder of the year.
Fortunately, added S&P, amid these challenges, the industry has shown significant improvements in operating performance in recent years.
“The reinsurance sector entered 2025 with a robust capital position, bolstered by excellent underwriting performance in short-tail lines, solid net investment income and recovering fixed-income asset values over the past two years,” said S&P Global Ratings credit analyst Taoufik Gharib.
He added, “In turn, we think global reinsurers are well positioned to manage the elevated natural catastrophe losses seen in first-quarter 2025, alongside the recent financial market volatility, and so maintain our stable view of the sector.” M