Abundant capacity and increasing competition among reinsurers are leading to softer pricing during the June and July renewals, which supports Fitch Ratings’ expectation that market pressures will persist in affecting prices even after the peak in 2024.
Considering this, Fitch has suggested that declining prices, increased claims severity from natural catastrophe events, and slightly looser terms and conditions in property lines are likely to lead to lower underwriting margins in 2025.
Of course, underwriting margins have been under pressure from sustained price erosion and increased claim severity, most notably from the Los Angeles wildfires and other natural catastrophe losses seen throughout the first half of 2025.
The agency states that the global reinsurance market has ample capacity as rising supply outpaces incremental demand from cedants, which according to the agency, is shifting pricing power to be in favour of reinsurance buyers, particularly in property lines, while the balance remains more even in casualty.
“Competition is generally focused on price rather than T&Cs. Property reinsurance revenue growth is underpinned by increased risk awareness among cedants and higher insured values, leading to increased coverage. Reinsurer appetite to write US casualty cover is mixed, with some reinsurers increasing their appetite and others withdrawing,” Fitch commented.
Furthermore, Fitch states that T&Cs are beginning to loosen as reinsurers become more willing to provide protection lower down on programmes, including at lower attachment points and for more frequent return periods.
“Working-layer and aggregate reinsurance protection are making a comeback, and reinsurers are becoming more open to negotiating T&Cs,” Fitch added.
“The first signs of less stringent T&Cs are emerging, driven by heightened competition and a very gradual relaxation of underwriting discipline.”
Despite this, Fitch noted that pricing remains above historical levels, and sector fundamentals still support strong, albeit off-peak, profitability.
Furthermore, Fitch confirmed that it will review its global reinsurance sector outlook ahead of the reinsurance industry’s annual Rendez-Vous de Septembre gathering in Monte Carlo. The sector outlook is currently ‘neutral’.
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