“We believe the pricing cycle has most likely passed its peak and we expect a softer market in 2025 due to the sector’s abundance of capital. We recently revised our global reinsurance sector outlook to ‘neutral’ from ‘improving’ to reflect this,” said Fitch
London: Reinsurance market participants appear to have varied expectations for pricing in 2025, says Fitch Ratings following its online survey carried out during the market’s annual gathering at the Rendez-Vous de Septembre in Monte Carlo.
Just over half of the 81 reinsurers, insurers, brokers and other market participants who responded thought global reinsurers would increase prices at the January 2025 renewals, continuing the rises of recent years, which have been driven by high claims inflation.
Some 30% of respondents expected prices to rise by more than 5%, while 26% expected more modest increases.
Only 22% of respondents thought prices would fall.
“We believe the pricing cycle has most likely passed its peak and we expect a softer market in 2025 due to the sector’s abundance of capital. We recently revised our global reinsurance sector outlook to ‘neutral’ from ‘improving’ to reflect this,”said Fitch.
Fitch believes reinsurers are well positioned to maintain their strong property-catastrophe profitability, even with prices easing, and expects underlying margins to remain close to their 2023–2024 peak in 2025.
“In particular, we expect them to maintain stringent terms and conditions to limit their exposure to secondary peril events as weather-related losses become increasingly significant and volatile due to climate change,” said Fitch.
There was no consensus among respondents on whether prices would be sufficient to compensate for increasing loss trends in the property-catastrophe business. Some 39% thought they would be, 36% thought the opposite, and 25% were unsure.
Respondents were fairly evenly split on which business line would offer the most attractive margins at the January renewals.
However, the least popular answer was casualty (16%), which may reflect the challenges reinsurers face in trying to keep pace with rising casualty loss costs, driven by social inflation.
Fitch expects reinsurers to push for double-digit increases in US casualty premium rates when policies come up for renewal, and to reduce cover limits and quota-share commissions.
Capital buffers and reserve adequacy have strengthened, helped by record profits in 2023 and 1H24, and we expect reinsurers to maintain their underwriting discipline.