A recent survey by Fitch Ratings indicates that reinsurers anticipate varied pricing trends for the January 2025 renewals, with over half of the respondents expecting price increases. This sentiment follows a series of years marked by rising prices due to high claims inflation.
The survey, conducted during the annual Rendez-Vous de Septembre in Monte Carlo, included 81 industry participants, encompassing reinsurers, insurers, and brokers. Approximately 30% of respondents predicted price hikes exceeding 5%, while 26% forecasted more modest increases. However, 22% of participants anticipated price declines, a viewpoint shared by Fitch, which suggests that the reinsurance pricing cycle may have reached its peak due to an oversupply of capital within the sector.
In light of these findings, Fitch has adjusted its global reinsurance sector outlook from ‘improving’ to ‘neutral,’ hinting at a possible softening of the market as 2025 approaches.
When asked to identify the most appealing business lines for margins during the January renewals, the responses varied significantly. Casualty lines were deemed the least attractive, with only 16% of respondents expressing interest. This hesitance reflects the increasing challenges of managing rising casualty loss costs, particularly as social inflation exacerbates these expenses. Fitch predicts that reinsurers may respond by pursuing double-digit increases in U.S. casualty premium rates while revising cover limits and quota-share commissions.
The sentiment surrounding property and catastrophe (P&C) insurance was also mixed. While 39% of respondents felt that pricing would adequately address the rising loss trends in this sector, 36% disagreed, and 25% remained uncertain. Despite this division, Fitch maintains an optimistic outlook for reinsurers’ capacity to sustain robust profitability in the P&C space, even if prices begin to decline. The agency attributes this confidence to strengthened capital buffers and improved reserve adequacy, supported by record profits reported in 2023 and the first half of 2024.
Looking ahead, reinsurers are expected to uphold underwriting discipline and enforce stringent terms to mitigate risks associated with secondary peril events, which are becoming increasingly frequent and volatile as a result of climate change.
Related topics:
