Reinsurers’ pricing in Australia and other major Asia-Pacific markets is expected to remain weak in the near term, maintaining pressure on their underwriting margins, according to Fitch Ratings.

The ratings agency says ample capacity is driving competition for business and reinsurers “are likely to underwrite more selectively, with pricing and terms increasingly shaped by geography, business mix and cedant loss experience.

“This may result in demand for more tailored coverage, especially in higher-risk segments, and reinforce underwriting discipline.”

Fitch says Australia and New Zealand reinsurance pricing trends are like those in Japan and South Korea, where property catastrophe rates have fallen by double digits on a risk-adjusted basis as program structures and terms remain broadly stable.

“Even so, reinsurers are generally maintaining closer attention to portfolio composition and underlying risk quality,” Fitch says in its Asian Reinsurance Monitor report.

An S&P Global Ratings report predicts reinsurance pricing will soften more next year as capacity from traditional reinsurers and alternative capital providers shows no signs of easing.

Lower than expected catastrophe losses in recent years have also affected rates, according to the report.

“As a result, reinsurers are likely to face increasing pressure to loosen terms and conditions, while property and casualty reinsurers’ underwriting margins and overall profitability will gradually compress over 2026-27,” S&P says.

“That said, we believe underwriting margins and overall profitability will remain sufficient to cover the sector’s cost of capital.”

According to the S&P report, Australian property catastrophe loss-free rates at the July renewals declined by 12.5%-17.5%.

Globally, reinsurers showed greater willingness to concede on pricing in renewal talks, while largely defending attachment points and maintaining underwriting discipline on terms and conditions, despite increasing market pressure.

“We expect pricing pressure to persist through 2027,” S&P says. “Rate reductions could match those seen in 2026, even if large losses reach annual budget levels.”

Fitch says Australia’s prudential changes designed to support broader use of alternative reinsurance structures are more flexible than originally proposed.

The final rules replace a broad all-perils coverage requirement with a net whole-of-portfolio approach, which better accommodates single-peril, partial-portfolio and alternative reinsurance structures, including catastrophe bonds and other insurance-linked securities.

“The reforms also remove reinstatement requirements where these are typically unavailable, such as for catastrophe bonds, while maintaining prudential safeguards,” Fitch says.

“Fitch believes these reforms enhance flexibility in reinsurance structuring and could support the broader use of alternative capital over time.”

The changes will take effect on January 1.