Bermuda’s reinsurance market is facing a major decline in property-catastrophe pricing but stronger policy terms and higher attachment points have helped preserve returns, according to AM Best.

In a new global reinsurance market segment report, the ratings agency said reinsurers had met their cost of capital for a third consecutive year, despite a softening market.

Bermuda is a major global centre for property-catastrophe reinsurance and insurance-linked securities.

AM Best said that the global reinsurance industry’s weighted average cost of capital had risen to 8.23 per cent in 2025 from 7.67 per cent a year earlier, before increasing again to 8.63 per cent in the first quarter of 2026.

However, reinsurers continued to generate returns above that level, helped by underwriting profitability after years of rate increases, tighter terms and a reduction in risk exposure.

The report said the median return on equity among reinsurance companies was 16.34 per cent in 2025, only slightly below the record performance reported in 2023.

The findings come as capacity in the property-cat market has increased and competition has pushed down prices.

AM Best cited Guy Carpenter figures showing that global property-cat rate-on-line declined by 12 per cent at the January 1 renewals and a further 16 per cent at the June and July renewals.

The midyear reduction is the steepest in decades and larger than any decline seen during the previous soft market of the 2010s.

The report said the fall reflected reinsurers’ recent profitability in property business. Even so, it noted that rates remained almost 40 per cent higher than in 2017, before the market began its most recent hardening cycle.

Global insured losses from natural catastrophes again exceeded $100 billion, according to the report, with severe convective storms accounting for more than $50 billion. But the structure of reinsurance programmes meant that much of the impact from those events was kept by primary insurers.

AM Best added that reinsurers had benefited from high investment income and were likely to continue earning relatively high yields for several years.