Although the global reinsurance industry achieved profit growth in 2023-2024 due to structural reforms and market pricing advantages, it still faces multiple challenges in 2025, including natural disasters, stock market fluctuations, and the risk of the US casualty reserve. S&p Global Ratings pointed out that the industry’s capital adequacy ratio is stable, but it is necessary to be vigilant about the impact of long-term pressure on the rating.
As of the end of 2023, the global reinsurance industry maintained a capital buffer of $21.5 billion at a 99.99% confidence level, capable of withstanding a 15% to 35% decline in the stock market (net losses ranging from $4.7 billion to $11 billion). More than 90% of the assets are investment-grade fixed-income securities, and the impact of interest rate fluctuations is limited.
In January 2025, the California wildfires caused the industry to lose approximately 50 billion US dollars, consuming 35% to 40% of Reinsurance companies’ annual catastrophe budget. The remaining 60% to 65% could still support the annual demand. Insufficient casualty reserves in the United States, social inflation (rising litigation costs), and potential multiple major disasters (such as hurricanes and earthquakes) may weaken capital redundancy.
S&p maintains a “stable” outlook, believing that the top 19 reinsurance companies can cope with short-term market volatility. However, long-term trade tensions (such as tariffs pushing inflation to 3%) or deterioration of the macroeconomy may suppress premium growth. Attention should be paid to the adjustment of the reserve requirement policy and the quality of the investment portfolio.
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