Swiss Re has said that while the non-life insurance and reinsurance market has entered a softer phase of the underwriting cycle, it does not anticipate the depth of the downturn being as significant as we’ve seen in the past.
The reinsurance company also cautions on the risk of fragmentation, as capital controls, regulatory divergence, sanctions and financial system segmentation all pose a threat to the way reinsurance, retrocession and alternative capital market or insurance-linked securities (ILS) function.
On prospects for the global re/insurance market Swiss Re explains that, “Global non-life real premium growth is expected to soften to 0.6% in 2026, reflecting competitive pricing conditions and moderating economic momentum, while life insurance growth will stay robust at 2.3%, supported by higher yields.”
At the same time, development of artificial intelligence (AI) infrastructure and the afore-mentioned geopolitical fragmentation, are driving new demand for resilience and risk transfer solutions, Swiss Re said.
“As recurring supply shocks, geopolitical fragmentation and large-scale investments in new infrastructure reshape the global economy, the role of re/insurance in helping businesses and societies build resilience is becoming increasingly important,” the company stated.
Jérôme Haegeli, Swiss Re’s Group Chief Economist, explained, “The latest Middle East conflict is not a one-off shock but another sign that geopolitical risk has become a structural feature of the global economy with four supply shocks in six years. As economies invest in AI infrastructure, energy systems and more resilient supply chains, entirely new pools of risk are emerging. Insurance has a vital role to play – not only in derisking these investments, but in enabling the real economic transformation and giving the risk a price.”
Ivan Gonzalez, CEO Swiss Re Corporate Solutions, added, “As the global economy and supply chains become more fragmented, demand is increasing for specialist solutions that support international trade, investment and business continuity. Meanwhile, the AI boom is driving unprecedented infrastructure investment. Some of the largest AI data centres now carry total asset values exceeding USD 20 billion before technology installation, creating significant construction, operational and accumulation risks. These interconnected exposures call for solutions that go beyond traditional insurance, combining risk engineering, alternative risk transfer and financing to help businesses invest with greater resilience.”
On non-life insurance premium, Swiss Re notes this sector is “entering a softer phase of the underwriting cycle.”
But the reinsurance company noted that, “this cycle is unfolding in a different environment from previous ones.”
Leading Swiss Re to suggest that, “Rising claims inflation, geopolitical uncertainty and growing catastrophe exposures are likely to limit the depth of the downturn.”
While global non-life insurance premium growth is expected to slow to 0.6% in 2026, meaningfully below the long-term trend of 3.6% CAGR, Swiss Re continued to explain why it feels this time is different, in terms of how soft the market will become and how it might react to uncertainty and losses.
“Advanced markets drive the slowdown, while emerging markets remain relatively resilient. The longer the inflationary pressures from the Middle East conflict persist, the greater the risk that its effects feed through to repair, replacement and liability costs, thereby partially offsetting downward pressure on pricing.
“This suggests that the current cycle may be shallower than past soft markets, with insurers likely to reprice more sharply if large losses, inflation and capital signals deteriorate beyond expectations,” the reinsurer stated.
The sector remains profitable though, with Swiss Re forecasting 11.4% ROE for the non-life space in 2026, down from a 14% peak in 2025.
But, if the soft market persists, Swiss Re sees non-life ROEs falling to 7.7% in 2028, at which level we’d imagine costs-of-capital may increasingly come into focus, as they did in the last soft market phase.
On the fragmentation risk that Swiss Re sees, this is seen as a threat to the functioning of reinsurance, retro and capital markets instruments such as ILS it seems.
Swiss Re explained, “Fragmentation may weaken the mechanisms that make insurance efficient and affordable. Cross-border diversification is central to re/insurance markets, but capital controls, regulatory divergence, sanctions and financial system segmentation could encourage local retention of risk and capital.
“Measures such as limits on intragroup reinsurance and local collateral requirements would erode the diversification benefits on which reinsurance, retrocession and alternative capital markets depend.”
Adding that, “A more fragmented financial system would weaken these shock-absorbing mechanisms and increase the local cost of covering catastrophe risk.”
