The reinsurance market is experiencing divided opinions on the upcoming January 2025 renewals, with market participants disagreeing on whether price increases will be adequate to address rising loss trends, particularly in property catastrophe lines. A survey conducted by Fitch Ratings reveals a split in expectations, highlighting uncertainty in an evolving market.
Mixed Outlook on Price Movements for 2025 Renewals
Fitch Ratings recently released the findings of a survey involving 81 reinsurers, insurers, brokers, and other market players regarding the anticipated price movements at the January 1, 2025, reinsurance renewals. The survey revealed that more than half of respondents expect global reinsurers to raise prices. Specifically, 30% foresee price increases of over 5%, while 26% predict rises of less than 5%. However, not all agree on a hike—22% of respondents expect pricing to remain flat, while a combined 22% expect reductions, with 10% projecting cuts of over 5%.
Fitch itself has voiced expectations for a softer reinsurance market in 2025, predicting price reductions due to an abundance of capital in the market. According to the rating agency, the pricing cycle has peaked, and a decline in rates is anticipated as reinsurers continue to maintain profitability.
Property Catastrophe Outlook Remains Uncertain
Property catastrophe insurance remains at the heart of the debate. The survey highlights a divided perspective on whether price hikes in this area will be enough to account for increasing loss trends. Among respondents, 39% believe that prices will rise sufficiently to cover escalating losses, while 36% do not share this view. A further 25% are uncertain, reflecting the unpredictability surrounding the renewals.
Despite the potential for softer pricing, Fitch expects reinsurers to retain strong profitability in property catastrophe lines, citing robust capital reserves and improved underwriting discipline as key factors.
Market Poised to Maintain Profitability
While pricing may soften, reinsurers are expected to remain disciplined in their underwriting. Fitch believes that the structural changes made in recent years have fortified the reinsurance market, and record profits from 2023 and early 2024 have strengthened capital buffers and reserve adequacy.
The rating agency also emphasizes that reinsurers are unlikely to expand exposure to secondary perils, which have driven significant insured losses. This continued focus on disciplined risk management, despite potential easing of prices, is expected to preserve profitability across the industry.
Varied Expectations for Line Profitability
Fitch’s survey also explored which lines of business are expected to offer the most attractive margins at the January 2025 renewals. Opinions were once again split: 25% of respondents pointed to property, 21% favored property catastrophe, 20% chose specialty or other lines, 18% motor, and 16% casualty.
Casualty, which was the least favored, is grappling with adverse developments reported during the first half of 2024. As a result, Fitch expects reinsurers to push for double-digit increases in U.S. casualty rates and make adjustments to quota-share commissions.
A Challenging Renewal Period Ahead?
As the January 2025 renewals approach, the reinsurance industry faces significant challenges, especially in the property catastrophe space. Reinsurers will be working to balance profitability with risk exposure, while buyers contend with losses driven by secondary perils and the unpredictable backdrop of climate change. How supply and demand align in the coming months remains to be seen, but all signs point to a late and potentially difficult renewal season for some players.