Reinsurers near break-even, 2027 will tell who can stay the course: MS Re’s Wiest

Reinsurers could reach a break-even point as soon as 2027 if current market trends continue, with some slipping into losses as margins erode further, MS Reinsurance chief executive Robert Wiest has warned.

Key points:
Strong 2026 results could mask pressure
No single reinsurance cycle exists
MS Re planned for softer 2027-29

“2027 a determining year for reinsurers. Some will dip into the red and some will still stay above the waterline.”

“We are getting closer to what I call the break-even point,” Wiest told Monte Carlo Today. “I don’t think 2026 is a break-even point. It might actually be an excellent financial year.”

But that could mask what is happening underneath.

“2027 might be a break-even year for reinsurers if we continue as we are. Most probably, some will dip into the red and some will still stay above the waterline,” he said.

“I see 2027, maybe late 2027, as a determining year for reinsurers, and then in subsequent years you will start to see more and more reinsurers actually losing some money.”

The warning is particularly striking because Wiest believes 2026 could still produce strong reported results. Low catastrophe activity so far is helping profitability, he said, but with a more average claims burden, not every reinsurer would necessarily remain profitable.

Nor does he see a single reinsurance cycle moving uniformly towards a bottom. “The reality is there is no one cycle,” Wiest said. “It is a multitude of micro-cycles – lines of business, regions and client segments.”

Some specialist reinsurers might still find themselves in attractive markets, while others could already be at the bottom.

Strategies will be put to test

The next few years will force reinsurers to reveal whether they are truly strategic relationship partners or whether they are transactional.”

For Wiest, declining margins will test more than underwriting discipline. They will expose which reinsurers have built business models capable of surviving the softer phase they knew would eventually arrive.

“The next three years will force reinsurers to show their hands,” he said.

He added: “It is very easy to sell ‘I am a long-term partner’ in the good times, when you are almost sure you are making money. It is much harder to maintain the strategic positioning and a seat on the panel if your margins get squeezed.”

That creates a practical question for every reinsurer: where is the point at which margins become too thin to continue supporting a client?

“The next few years will force a lot of reinsurers to reveal whether they are truly strategic relationship partners or whether they are transactional,” Wiest said.

MS Re has been planning for that test for several years. Wiest said the company built an assumption that 2027, 2028 and 2029 would bring a softer cycle into its forecasts, business planning and investment decisions rather than extrapolate the stronger market indefinitely.

“We have never planned for a straight line upwards,” he said. “If you had assumed the market would continue its positive linear trajectory, you have a problem right now.”

That planning follows a four-year transformation at MS Re that began after Wiest joined as chief executive in 2022. The company has since rebalanced its portfolio, overhauled its operating platform and strengthened its underwriting capabilities. In May, Wiest said MS Re was moving beyond transformation and into the next stage of its development.

Growth gets more selective

The softer outlook does not mean MS Re intends to stop growing. But Wiest said the emphasis is increasingly on doing more with cedants the reinsurer already knows rather than adding clients simply to maintain momentum.

“In the current softening market, we’re leaning more than ever into selective growth from clients we know and understand,” he said.

That becomes more important as risks themselves become increasingly connected across underwriting and investment portfolios.

Cyber is one area where MS Re is becoming more cautious, particularly because of the uncertainty created by AI. “Cyber is the big unknown, and I think we have to admit we know less than last year,” Wiest said.

The problem is fundamental to underwriting. “If we can’t quantify the risk, we can’t tell you the price,” he said.

Yet Wiest does not believe retreat is an adequate response. Given societies’ dependence on technology, he questioned whether insurers and reinsurers can afford not to provide cyber protection.

“I would clearly single out cyber as a societal responsibility,” he said. “This is a big topic and cannot be approached as a simple business opportunity. There are big question marks because we don’t understand enough.”

‘Who are you?’

As conditions deteriorate, Wiest believes access to capital will remain a critical differentiator despite its current abundance. For cedants, the issue is not simply whether a reinsurer has capacity at the next renewal, but whether that capital remains reliable when economics become considerably less attractive.

That brings Wiest back to what he sees as the defining question for reinsurers over the next stage of the cycle. “Who are you? Are you a transactional reinsurer or are you a long-term, partnership-oriented reinsurer?”

Both are legitimate models, he said. The problem comes when reinsurers promise one thing and behave like another once margins disappear. “Realism is as important as honesty. Some reinsurers are overpromising, which jeopardises their ability to be a sustainable, long-term partner.”

Wiest believes a future-proof reinsurer ultimately needs a business model capable of maintaining access to capital through almost any market conditions. “If you don’t have that, then you are dead in the water.”

For now, the market continues to soften and profitability remains. But Wiest’s warning is that the results reinsurers report today might not reveal how close that test has become. “We all knew it,” he said of the softer market. “Now it is starting to manifest.”

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