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Broker Guy Carpenter said profitability increased 2 percentage points to 18% in 2025

Some of the world’s largest reinsurance companies boosted profitability this year after they reduced coverage to limit their risk from catastrophic events such as flooding and increased prices for their policies.

The annual return on equity, a key measure of profitability for reinsurers, rose 2 percentage points to 18 per cent this year, reinsurance broker Guy Carpenter said. The expected growth for 2025 compares with a gain of 22 per cent in 2023. Reinsurers sell insurance to insurance companies.

The latest returns extend a run of bumper profits that started in 2023 as many reinsurers cut back on the cover they offer against costly perils such as flooding and demanded higher premiums, which are ultimately passed on to customers, including governments, businesses and homeowners.

Insurance companies and governments buy reinsurance to offload some of their exposure to risks including hurricanes, cyber attacks and war. The policies enable groups with exposure to one region — such as to Florida’s increasingly intense hurricanes — to manage their financial risk.

Guy Carpenter, a unit of insurance broker Marsh, expects the reinsurance industry to post bumper profits until the end of 2027 at least, despite the toll of natural catastrophes such as January’s wildfires in California, which caused about $40bn in insured losses.

Profitability is set to remain resilient even as increasing bets on reinsurance by hedge funds such as Elliott Management and private capital groups including Blackstone have pushed down the price of reinsurance, to the detriment of traditional providers.

Private investors have also pushed into reinsurance by investing in so-called catastrophe bonds — which transfer the risk of disasters to bondholders — whose sales hit a record this year as insurers sought to offload the growing risk from climate change.

A year with more than $100bn in insured losses was once rare but has become routine for the insurance industry in recent years as inflation, urban sprawl and climate change have pushed up the cost and severity of natural disasters.

The price of property reinsurance deals for 2026, when policies are renewed, fell about 12 per cent, according to Guy Carpenter. But the 2023 price rises had given the sector a large enough buffer for investors to expect “strong profitability” over the next few years, said David Duffy, president of global clients at Guy Carpenter.

Insurers and reinsurers have sought to develop new markets for their products, such as artificial intelligence, where they hope to sell more cover for data centres and the energy infrastructure needed to power computing.

Aon, the world’s largest reinsurance broker, said that the construction of data centres could generate insurance premiums of more than $100bn to the end of the decade.

At the December meeting, some officials backed holding rates steady ‘for some time’

WASHINGTON—When the Federal Reserve met to cut interest rates this month, some officials said they were reluctant to support more easing in the near future, according to minutes of the meeting published Tuesday—a sign that further cuts could face resistance at the next meeting in January.

The written record of the Fed’s December meeting, released after the customary three-week delay, showed that most members of the Fed’s policy committee thought that rates could eventually fall further if inflation declines. The Fed cut rates at three straight meetings to end 2025 as it sought to cushion a weaker labor market.

Cuts have become an increasingly close call because price increases have been more persistent than the Fed would like, the minutes indicated. Data released after the Fed’s meeting indicated inflation cooled in November—but economists have said that the recent government shutdown could have distorted those numbers.

Most Fed policymakers backed this month’s rate cut, but some of those officials “indicated that the decision was finely balanced or that they could have supported keeping the target rate unchanged,” the minutes said. Other officials opposed December’s rate cut, expressing concern that the Fed’s efforts to get inflation back to the 2% target stalled this year, the minutes said.

The minutes underscored the divisions within the Fed, especially in the most recent vote which drew three dissents—two from officials against any cut and one from a Trump ally who favored a larger cut.

Looking ahead, some officials suggested that “it would likely be appropriate to keep the target range unchanged for some time,” the minutes said.

Since the meeting, more economic data have been released showing that strong consumer spending has helped fuel robust economic growth—despite a slight rise in unemployment. New data scheduled to be released next month could reshape the thinking of Fed officials heading into their next meeting in late January.

The Fed held interest rates steady at elevated levels for most of 2025 to address a stubborn pace of rising prices. A subsequent downshift in the labor market prompted three straight quarter-point rate cuts between September and December, moves aimed at averting a deeper slowdown.

To many economists, the job market still looks fragile as the calendar turns, with sluggish hiring and the unemployment rate rising this year to 4.6%. Yet lingering inflation, and the rate cuts already in the rearview, may force the Fed to move more cautiously if it decides to continue easing in 2026.

At 3.5% to 3.75%, the Fed’s targeted interest-rate range is lower than it has been in three years, and a vocal group of Fed officials is wary of lowering it further while inflation remains somewhat above target. Each of the fall’s three rate cuts faced successively greater internal resistance.

In the forward-looking “dot plot” published earlier this month, the median Fed official projected just one more rate cut in all of 2026, although the outlook varied widely among the 19 officials who submitted forecasts. At this point, the central bank is moving into fine-tuning mode and may want to make any further cuts at a slower pace, said Patrick Harker, a former president of the Philadelphia Fed.

“You don’t know exactly where the destination is, so you don’t want to go slamming into the wall,” he said.

Economic data published since the December meeting have mostly looked reassuring, although delays and technical challenges caused by the recent government shutdown have undercut the data’s value to policymakers. In particular, economists have second-guessed numbers showing that consumer inflation dropped to 2.7% in November, warning that quirks in how government statisticians handled missing October figures made recent price increases look milder than they were in reality.

Other recent reports showed that the economy grew at a better-than-expected 4.3% annualized rate in the three months through September, and that while unemployment has edged higher, hiring hasn’t collapsed.

In recent speeches and projections, some Fed officials have said they see a decent path ahead for the economy in 2026, with business-friendly tax changes and less uncertainty over President Trump’s volatile trade policy likely to spur solid growth and a modest decline in the unemployment rate.

In that light, it might take bad news in the December jobs report—due Jan. 9—to push Fed officials toward a fourth straight rate cut at their next meeting on Jan. 27–28, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. For now, bets in interest-rates futures show that traders mostly think the Fed will hold rates steady in January.

Hanging over the central bank’s deliberations is Trump’s search for a successor to Chair Jerome Powell, whose term at the Fed’s helm ends in May. Trump has interviewed several finalists for the role in recent weeks, a process that has drawn scrutiny over Trump’s demands that his chosen candidate align with the president’s insistence on lower interest rates.

U.A.E. says it will pull troops from Yemen after Riyadh issued an ultimatum

Tensions between U.S. allies Saudi Arabia and the United Arab Emirates flared Tuesday, when the kingdom warned its Gulf rival against endangering its security and said it would take all necessary measures to counter the threat.

The fast-escalating dispute was spurred by fighting in the two-thirds of Yemen controlled by forces opposed to the Iran-backed Houthi militia, which rules over the rest. U.A.E.-backed forces there have outmaneuvered rivals backed by Saudi Arabia to take control of energy-rich territory along the kingdom’s border.

The Saudi Foreign Ministry on Tuesday called the moves a threat to its security and gave the U.A.E. 24 hours to pull its troops out of Yemen and end financial or military support for any forces in the country.

“The steps taken by the U.A.E. are considered highly dangerous,” the ministry warned. “The Kingdom stresses that any threat to its national security is a red line, and the Kingdom will not hesitate to take all necessary steps and measures to confront and neutralize any such threat.”

Later on Tuesday, the U.A.E. Defense Ministry said it would withdraw its remaining forces from Yemen, characterizing the move as voluntary, a step that could cool tensions.

It wasn’t immediately clear whether troops had begun to leave or whether that would resolve the crisis. The U.A.E. didn’t mention ending support for Yemeni militias and earlier in the day denied having done anything to escalate the conflict.

Saudi Arabia had signaled its growing impatience in recent days, conducting airstrikes against U.A.E.-backed forces along its border Friday and bombing shipments of what it said were arms supplied by the U.A.E. at Yemen’s Mukalla port overnight.

The kingdom also recently deployed its aligned Yemeni forces to the border area, raising the prospect of conflict with U.A.E.-backed forces there, Yemeni officials said.

The worsening tone came as the two Gulf powers—each courted by the Trump administration as it realigns U.S. policy in the Middle East—find themselves on opposite sides in conflicts across the region, from Yemen to Sudan to Syria.

The rift presents a diplomatic challenge for the U.S. and is an unwelcome complication as Washington works to keep Iran contained and persuade Tehran to give up its nuclear program.

While the skirmishing between the two Gulf powers in Yemen is a sideshow to the more important conflict with the Houthis, it threatened to expand the fighting in a region already battered by two years of war.

“The current U.A.E.-Saudi standoff in Yemen has been building across multiple files that have produced a slow-burning rivalry,” said Mohammed Al-Basha, founder of U.S.-based Middle East security advisory company Basha Report.

U.S. Secretary of State Marco Rubio expressed concern over the weekend about the developments in Yemen and called for restraint.

Saudi Arabia and the U.A.E. have long maintained peaceful relations with each other and are key security partners for the U.S., but tensions have simmered just below the surface and occasionally erupt. U.A.E. President Sheikh Mohamed bin Zayed Al Nahyan was once a mentor to Saudi Crown Prince Mohammed bin Salman, but the two leaders have feuded in recent years over who calls the shots in the Middle East.

In the latest strike, Saudi military spokesman Maj. Gen. Turki al-Maliki said weapons and combat vehicles were targeted in the city of Mukalla, Yemen’s largest port on the Arabian Sea and the gateway to Yemen’s oil country. The weapons and vehicles were unloaded from two ships that had left the Emirati port of Fujairah and had disabled their tracking systems, Saudi officials said.

Saudi officials said the weapons were intended to support the Southern Transitional Council, a group that favors splitting out a state separate from northwest Yemen, which is held by the Iran-backed Houthis.

Mohammed Al-Zubaidi, head of the STC in areas near the Saudi border, condemned Friday’s strikes as an assault on the region’s people and praised the U.A.E. as a reliable ally.

The U.A.E. Foreign Ministry called the Saudi allegations inaccurate and said it had done nothing to affect the kingdom’s security. It said the shipment at Mukalla port didn’t include weapons and that the goods were for use by Emirates troops in the country.

Emirati troops in Yemen act as advisers for their allied local forces and provide reconnaissance support for fights against militants like al-Qaeda in the Arabian Peninsula.

The Saudis support a unified Yemen, though in reality, with the Houthis firmly in control of the northwest and the country’s historic capital, San’a, Riyadh has focused more on managing the internal conflicts between Yemeni factions and putting its own proxy forces in control of border areas.

The Trump administration has invested heavily in relations with the Gulf powers. President Trump conducted a high-profile trip through the Gulf in the spring and welcomed Saudi Arabia’s Mohammed to the White House last month.

A long-awaited Siri update is coming—and Apple has the cash to get opportunistic if its rivals start running low.

The Takeaway

As AI has completely consumed the tech industry, Apple has held back from the colossal investments in the technology its peers have been making. Wall Street, pundits and media outlets have criticized and chronicled Apple’s stumbles and seeming lack of urgency in the AI arms race. That includes us.

But I would like to propose another possibility: that 2026 could vindicate Apple’s decision to stay out of the fray.

Already, the market is turning skeptical of the AI game. Even as OpenAI, Meta Platforms and others commit hundreds of billions to data center build-outs, doubts are emerging over whether the AI business can justify spending on this scale.

This is the first piece in our 2026 Predictions series. These are educated guesses of what could happen next year based on reasoned analysis, deep prior reporting—and a dash of amused speculation.

Apple, in contrast, has kept its spending in check and has not made any splashy AI acquisitions or investments. Its core iPhone business remains stable—lately it has shown surprising signs of growth, despite the lack of major AI innovations coming to the product.

In 2026, the market could very well continue to turn against businesses that burn through cash on AI without showing much revenue in return. Apple could be uniquely poised to take advantage of the moment. It has some of the deepest pockets around, with more than $130 billion in cash, which would position it well for a bargain-hunting expedition if valuations of AI startups shrivel.

Apple will also have an opportunity to finally show it can do AI right. In the spring, it’s expected to release an overhaul of its Siri voice assistant that is more conversational and able to complete complicated tasks for users. Its decision earlier this year to delay the release of that overhaul and shake up the team responsible for it is one of the big reasons opinions about Apple’s AI efforts are so low.

To get the new version of Siri up to snuff, Apple may end up partnering with the best outside AI model makers—it’s testing Google’s Gemini at the moment. Apple still has a team working on its own internal models that it could take advantage of in the future. But some Apple leaders hold the view that large language models will become commodities in the years to come and that spending a fortune now on its own models doesn’t make sense.

Apple’s strength in smartphones could also give it a leg up over its AI competitors by providing a powerful vehicle for distributing AI to its users. While Apple can seamlessly integrate AI into its devices, AI companies can only develop stand-alone apps for the iPhones (unless they partner with Apple). Many of these companies, such as OpenAI and Meta, hope to build competing devices to get around hardware gatekeepers like Apple. But they face long odds in competing with Apple’s hardware capabilities.

“Apple plays to where its core competencies are,” said Tony Wang, portfolio manager of the science and technology fund at T. Rowe Price, one of the 10 largest shareholders in Apple. “They’re not throwing down tens of billions of dollars to train an AI model. They’re focused on what they’re really good at and integrating AI with their ecosystem.

“They’ve earned a reputation to be trusted with what they’ve built,” Wang added. “Investors trust them.”

That said, Apple could still botch this. It has a long history of fumbling its AI efforts. In 2011, the company was an early entrant into consumer AI with the launch of Siri, which came out of an acquisition the company had made the prior year. While Apple was out in front, it fell behind in the years that followed. It struggled to update Siri and keep up with new voice assistants, including Amazon’s Alexa, released in 2014. With the release of OpenAI’s ChatGPT in late 2022, Siri’s lagging capabilities became even more apparent.

But none of these AI missteps ended up being a big deal for Apple. Amazon, for instance, found that after a few years in which it saw an initial explosion of Alexa-enabled devices, most consumers didn’t want to do all that much with Alexa outside rudimentary commands like setting timers or playing music. And while LLMs like ChatGPT have transformed the tech industry, there appear to be serious limits on how broadly useful the technology might be.

Apple has taken steps to put its AI operations in order. Earlier this year, after delaying the new Siri, the company placed the voice assistant under Mike Rockwell, who previously launched the Vision Pro headset at Apple. Although Rockwell doesn’t have a background in AI, he’s a technologist at heart and can quickly get up to speed on any new technology, people who have worked with him say.

And earlier this month, Apple’s AI leader, John Giannandrea, announced his retirement. With his departure, Apple distributed a chunk of his team across several groups, including software and service teams. One complaint internally about Giannandrea was that he ran the AI group without a clear product focus. With those teams now reporting to product-focused leaders, Apple may finally have a shot at delivering something useful in AI.

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