Global Insurers and Reinsurers CEOs Upbeat About 2025
Insurers and reinsurers CEOs remain cautiously optimistic about 2025, although expectations vary significantly between property catastrophe and liability segments, KBW analysts said at the AIFA conference.
Property catastrophe insurance and reinsurance is expected to deliver stable earnings, while liability insurance is facing pressure from social inflation, which is limiting premium growth.
KBW analysts note that reinsurers are confident in the stability of property catastrophe reinsurance earnings. Reinsurance entry levels remain unchanged, and a slight decrease in rates only partially offsets previous sharp premium increases.
Analysts also emphasize that the industry has sufficient capital to cover the growing demand, in particular for reinsurance of smaller cedants affected by the California wildfires. However, the tightening of contract terms and conditions may limit the flexibility of cedants to classify catastrophic events.
Unlike property reinsurance, most respondents express restraint in liability reinsurance. Current market prices, especially cedant commissions under quota contracts, do not fully take into account the impact of social inflation, which necessitates the need to strengthen reserves.
One top manager noted that the worst effects of social inflation have not yet fully manifested themselves, which may lead to further increases in rates in primary liability insurance. Ultimately, this will also affect rates in liability reinsurance.
Until then, cedants will face stricter selection criteria and premium growth in liability reinsurance will remain limited, mainly due to higher rates in primary insurance.
KBW also reviewed Bermuda’s tax environment. Most local reinsurers expect the deferred tax assets (DTA) recorded at the end of 2023 to be reversed within two years.
None of the companies KBW analysts spoke to expressed concerns about capital adequacy. Many are considering share buybacks if the scope for premium growth remains limited.
Bermuda’s tax law allows companies to use deferred tax assets. However, it is likely that regulators could introduce compensatory measures, such as payroll or estate tax reductions, as early as the end of this year to offset the impact of the tax on corporate profits. However, KBW does not expect such changes in the first half of 2025.
Despite the challenges in the liability insurance sector, the general mood among insurance and reinsurance companies in the property and liability insurance segment remains cautiously optimistic.
KBW analysts predict an increase in the value of shares of insurers and reinsurers that are able to take advantage of market opportunities and effectively manage risks. Positive dynamics are also expected for brokers that demonstrate competitiveness despite the slowdown in organic revenue growth.