Global reinsurers are well placed to manage financial market volatility triggered by US tariff announcements and reciprocal actions, S&P Global Ratings says.

The tariff plans have prompted capital market routs across the world, leading to increased investment portfolio volatility and adding to a turbulent start to the year amid the California wildfires.

“Despite these challenges, we believe global reinsurers remain well positioned, supported by robust capitalisation and sound earnings prospects,” S&P says.

Reinsurers achieved strong earnings growth in the past two years, exceeding their cost of capital, although adverse developments in certain US casualty loss reserves remain a key risk.

The sector maintains conservative investment portfolios, with the largest asset allocation concentrated in high-quality, fixed-income securities, with at least 90% classified as investment grade.

Potential interest rate fluctuations can lead to temporary unrealised gains or losses, but the sector’s holding of investments to maturity can mitigate volatility impacts.

Reinsurers are also in a strong position to manage impacts from the Los Angeles wildfires, which have caused estimated insured losses of $US40-$US50 billion ($65-$79 billion).

S&P says it is likely the top 19 global reinsurers will shoulder about 20% of related losses, consuming 35%-40% of their annual natural catastrophe budgets but leaving sufficient capacity to withstand additional events and still meet their cost of capital.

“However, the reduced buffer for natural catastrophes highlights the need for cautious risk exposure management as the year progresses,” it says.

S&P maintains a stable view on the global reinsurance industry.