After an extended period of rate increases across the (re)insurance sector – driven by accumulating and intersecting crises, capital constraints and cyclical adjustments – the availability of deployable capacity in the marketplace signals a new phase in the cycle, marking a significant shift from the recent past, added Howden
London: Reinsurance renewals at 1 January, 2025 experienced notable softening overall, reflecting strong price adequacy and reinsurers’ ambitions for growth.
According to Howden, a global re/insurance broker, demand for reinsurance was driven by volatile loss experience, rising exposures and model changes, whilst increased appetite from both traditional reinsurers and capital markets generated more than sufficient supply.
Market performance remained robust, supported by an attractive underwriting environment. In most lines of business, buyers can expect favourable market conditions to persist in 2025, barring any market-disrupting events, said Howden.
After an extended period of rate increases across the (re)insurance sector – driven by accumulating and intersecting crises, capital constraints and cyclical adjustments – the availability of deployable capacity in the marketplace signals a new phase in the cycle, marking a significant shift from the recent past, added Howden.
Favourable supply dynamics have become increasingly evident across both the commercial insurance and reinsurance markets over the last 12 months. These dynamics played a pivotal role in the 1 January, 2025 reinsurance renewals, fostering competition that led to risk-adjusted rate reductions in several areas, said Howden’s 2025 market report, ‘Past the Pricing Peak’.
According to the report, a risk-adjusted price reductions recorded at 1 January 2025 reinsurance renewals: retrocession – down 13.5%, direct & facultative – down 12.5%, global property-catastrophe – down 8%, London market casualty excess-of-loss – down 2%.
Pressure is also evident in the global commercial insurance market, where pricing across all lines of business came in at -0.9% in 2024, the first negative reading since 2017.
A key feature of this year’s renewals was differentiation by client and programme, as markets adopted a more granular approach, underscoring the importance of data transparency.
Global property-catastrophe:
Despite elevated catastrophe activity in 2024, including the uncertainty surrounding losses from the late-season Hurricanes Helene and Milton, favourable market conditions enabled insurers to navigate these challenges and secure property-catastrophe placements with rate reductions.
On average, risk-adjusted global property-catastrophe reinsurance rates-on-line decreased by 8%. In the US, early expectations for rate reductions in property-catastrophe renewals ultimately held true, despite initial uncertainty caused by Hurricanes Helene and Milton, which inflicted substantial damage in Florida and, in Helene's case, inland states.
Favourable conditions for buyers typically prevailed, resulting in risk-adjusted price decreases ranging from down 7.5% to down 15%.
Loss experience played a pivotal role in shaping European property-catastrophe renewals at 1January 2025.
Loss-free programmes secured rate reductions averaging between down 3% and down 15%, while loss-affected regions experienced significant upward pricing adjustments following recoveries.
Property retrocession:
The retrocession market saw another profitable and largely loss-free year in 2024, creating pressure on prices and signings at renewal. Although Hurricanes Helene and Milton made landfall in Florida as major storms in quick succession, their impact on the retrocession market was limited.
Helene caused significant damage, including in North Carolina, but its Florida landfall affected a relatively sparsely populated area, resulting in minimal recoveries. Milton similarly avoided a worst-case scenario, tracking south of Tampa Bay. Consequently, risk-adjusted pricing fell by between 10% and 20% on average at 1 January 2025.
Tim Ronda, CEO of Howden Re, commented, “Encouragingly, our clients are beginning to see relief from the pricing pressures of the last three years in several segments.”
Devastating and escalating wars, commodity shocks, soaring prices, financial market instability and high debt levels have ushered in a fragmented global order with profound implications for security, commerce, investment, supply chains, and political stability, said the report.
This new reality places businesses and carriers in a persistently high-risk environment, with the potential to intensify further.
If 2024 will be remembered for escalating conflicts, the ‘biggest election year ever,’ and economic divergence, 2025 is poised to be shaped by policy implementation (tariffs and trade) and the emergence of new cycles, said
Finding innovative risk transfer solutions to sustain market growth and address protection gaps will be critical as price momentum wanes.