Reinsurance prices set to rise, but 2025 may see market softening

Reinsurance prices set to rise, but 2025 may see market softening – Fitch | Insurance Business New Zealand

Reinsurance

Reinsurance prices set to rise, but 2025 may see market softening – Fitch

Potential price decreases predicted despite expectations around continued rate hikes

Reinsurance

By
Kenneth Araullo

Reinsurance market participants are showing mixed expectations for pricing trends in 2025, according to a recent survey by Fitch Ratings conducted during the Rendez-Vous de Septembre in Monte Carlo.

The survey gathered responses from 81 reinsurers, insurers, brokers, and other market stakeholders.

More than half of the respondents expect global reinsurers to continue raising prices at the January 2025 renewals, following the price increases seen in recent years due to high claims inflation. Around 30% of those surveyed predict price hikes of over 5%, while 26% foresee more moderate increases.

On the other hand, 22% of respondents anticipate a drop in prices, a sentiment shared by Fitch Ratings. Fitch noted that the reinsurance pricing cycle may have already reached its peak, forecasting a softer market in 2025 due to abundant capital in the sector.

As a result, Fitch recently downgraded its global reinsurance sector outlook from “improving” to “neutral”.

Opinions among respondents were divided on which business line would offer the best margins at the upcoming January renewals. The least favored line was casualty, with only 16% of respondents seeing it as the most attractive.

This may reflect the difficulty reinsurers face in managing rising casualty loss costs, driven by social inflation. Fitch expects reinsurers to push for double-digit increases in US casualty premium rates during renewals and to reduce coverage limits and quota-share commissions.

No clear consensus emerged on whether property-catastrophe prices would be sufficient to counteract increasing loss trends. About 39% of respondents believed prices would be adequate, 36% thought they would not, and 25% were uncertain.

Despite these varied views, Fitch believes that reinsurers are well positioned to maintain strong profitability in the property-catastrophe segment, even if prices ease. Fitch expects underlying margins to stay near their 2023–2024 peak into 2025.

Strengthened capital buffers and reserve adequacy, supported by record profits in 2023 and the first half of 2024, should help reinsurers remain disciplined in their underwriting. Fitch also anticipates that reinsurers will uphold strict terms and conditions to manage their exposure to secondary peril events, which are becoming more significant and volatile due to climate change.

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