Global reinsurers will raise tariffs in 2025
Participants in the global reinsurance market have different expectations for reinsurance rates in 2025, according to a survey by Fitch Ratings during the Rendez-Vous de Septembre in Monte Carlo. Forinsurer analyzed the point of view of reinsurers and chose the most important.
More than half of the reinsurers, insurers, brokers and other market participants surveyed (81) believe that global reinsurers will raise rates from January 2025 during contract renewals, continuing a trend in recent years that has been fueled by high claims inflation. Approximately 30% of respondents expect reinsurance rates to increase by more than 5%, while 26% expect a more moderate increase.
Only 22% of respondents believe that tariffs will decrease, but Fitch shares their opinion.
We believe reinsurance prices have already peaked and expect a softer market in 2025 due to excess capital in the sector. We recently revised our outlook for the global reinsurance sector to ‘neutral’ to reflect this trend
Respondents were almost evenly split on which programs would be the most profitable after the January renewals of reinsurance contracts. Accident insurance coverage will be the least popular (16%), which may reflect reinsurers’ difficulty in reducing losses caused by social inflation.
Fitch expects reinsurers to expect double-digit increases in US casualty rates as well as reductions in reinsurance coverage limits.
There was no consensus among respondents as to whether pricing would be sufficient to offset rising loss trends in the property-casualty insurance segment. About 39% believed that the prices would be adequate, 36% held the opposite opinion, and 25% were undecided.
What are reinsurers’ expectations for reinsurance rates in 2025?
Which programs will bring reinsurers more profits?
Will the rate hikes be enough to offset rising losses from natural disasters?
Will the increase in tariffs be enough to compensate for the increase in losses from natural disasters
Fitch believes that reinsurers are well positioned to maintain profitability in the natural catastrophe property segment, even with rate cuts, and expects core margins to remain at the 2023-2024 peak in 2025.
Reinsurers’ capital and reserve adequacy have been strengthened by record profits in 2023 and the first half of 2024, according to analysts at Beinsure, who expect reinsurers to maintain underwriting discipline. In particular, global reinsurers will maintain tight limits and underwriting conditions to limit exposure to secondary natural events as losses from natural catastrophes become more significant and unpredictable due to climate change.
Aon estimates the insurance industry’s losses from natural disasters for 9 months of 2024 at $102 billion. The impact of losses from Hurricane Milton and other catastrophic events is expected to increase insurance losses to $125 billion recorded in 2023 by the end of the year.
Aon analyzed 280 significant natural disasters around the world that caused economic losses of at least $258 billion. This is about 27% less than the same period in 2023, when the loss was $351 billion, and also below the average of $277 billion.
However, insurance losses at the level of 102 billion dollars for 9 months of 2024 exceed last year’s 88 billion dollars and the average figure of 79 billion dollars. This was despite a 60% protection gap, which Aon says is one of the lowest ever, driven by a higher share of losses in the US, where insurance penetration is higher than in other countries.