Overview
Softer pricing at reinsurers’ June and July reinsurance renewals supports Fitch Ratings’ view that abundant capacity and rising competition will continue to pressure prices following the 2024 peak. Beinsure analyzed the report and highlighted the key points.
Declining reinsurance prices, increased claims severity from natural catastrophe events, and slightly looser terms and conditions (T&Cs) in property lines are expected to reduce underwriting margins in 2025.
However, pricing remains above historical averages, and sector fundamentals still support strong, though below-peak, profitability.
Reinsurers were looking to balance their appetite for growth with their objective of orotecting profitability. The result was risk-adjusted rate reductions around 10-15% on average.
Key Highlights
- Property Reinsurance Rates Decline. Loss-free property reinsurance programs saw average risk-adjusted rate reductions of 10–15% at the July 1, 2025 renewals, continuing the downward trend observed earlier in the year.
- Ample Capacity Favors Buyers. The global reinsurance market’s growing capacity exceeded incremental demand from cedants, shifting pricing power toward buyers, especially in property lines, and enabling improved outcomes for differentiated clients.
- Underwriting Margins Under Pressure. Declining prices, higher claims severity from events like the Los Angeles wildfires, and looser T&Cs are squeezing underwriting margins, though investment income and strong reserves help offset the impact.
- Loosening Terms and Conditions. Reinsurers showed more willingness to provide protection at lower attachment points and for more frequent return periods, with working-layer and aggregate covers reappearing amid increased competition.
- Neutral Sector Outlook Maintained. Despite these trends, the reinsurance sector remains profitable, with a neutral outlook from Fitch ahead of the Rendez-Vous de Septembre, supported by strong reserve adequacy and investment income.
Reinsurance buyers generally experienced a more competitive reinsurance market at the July 1 renewal compared to recent years, with capacity available even where demand increased, and reinsurers looking to grow, according to Gallagher Re’s report.
Pricing across most reinsurance lines continued to decline
Pricing across most reinsurance lines continued to decline gradually, as seen at the January and April renewals, with rates for loss-free property programs falling by 10–15%.
With these conditions in place, clients had the opportunity to challenge the status quo, and secure improvements to the structure and terms of their property and specialty reinsurance programs, according to Global Reinsurance Market Report.
In contrast, U.S. casualty pricing held steady, while retrocession pricing and coverage improved. Specialty lines show varying trends, with cyber rates still declining and aviation remaining stable.
Underwriting margins are under pressure from ongoing price erosion and higher claims severity, particularly from the Los Angeles wildfires and other natural catastrophe losses in the first half of 2025.
The financial impact of lower pricing since mid-2024 is now visible, as new business carries lower margins. This is partly offset by steady investment income.
Global reinsurers reported strong results with a continued capital build driven by strong retained earnings.
The reinsurance industry’s reported and underlying ROE remained well above the cost of capital, supported by further improvement in the underlying combined ratio and increased recurring investment income.
Reinsurers to use favorable reserve developments
Strong reserve adequacy provides a cushion, allowing reinsurers to use favorable reserve developments in most lines to support earnings (see TOP 50 Largest Global Reinsurance Groups).
However, some liability lines could experience more adverse reserve development due to the prolonged impact of social inflation.
- $769 bn — Total reinsurance dedicated capital at year-end 2024, reaching a new peak.
- 10–15% — Average risk-adjusted rate reductions achieved on property reinsurance at July 1, 2025 renewals.
- $56 bn — Global insured catastrophe losses in Q1 2025, driven largely by the Los Angeles wildfires.
- $15.2 bn — H1 2025 cat bond issuance through June 13, up 36% year-on-year.
- $4 bn — Growth in non-life ILS assets under management in Q1 2025, supporting additional capital supply.
Reinsurers showed greater confidence in those cedants who articulated the actions they have taken to improve performance, and how their actions tangibly improve future performance.
Yet there was a clear market divide. For cedants unable to provide evidence on how they are tackling the performance issues, outcomes were less favorable.
That puts a premium on not only articulating, but also crucially quantifying, the impact of these strategic improvements.
Gallagher Re has been working closely with our clients to evidence the impact of these shifts, from overhauling claims practices, to changes in business mix by geography or industry.
Global reinsurance market has ample capacity
The global reinsurance market has ample capacity, as increasing supply exceeds incremental demand from cedants.
This shift in balance favors reinsurance buyers, especially in property lines, while pricing power remains more balanced in casualty. Competition largely focuses on price rather than T&Cs.
Property reinsurance revenue growth reflects greater risk awareness among cedants and higher insured values, which increase coverage needs.
Reinsurers were less willing to lean into the risk market, reflecting historically lower margins. Client differentiation remains key, and those cedants able to show they have devoted time and attention to optimizing their per risk programs have seen meaningfully improved outcomes.
Reinsurers expanding their participation and others withdrawing
Appetite for U.S. casualty cover varies, with some reinsurers expanding their participation and others withdrawing.
T&Cs are loosening as reinsurers show more willingness to offer protection lower in programs, including at lower attachment points and for more frequent return periods.
Working-layer and aggregate reinsurance protection are reappearing, and reinsurers are increasingly open to negotiating T&Cs.
The first signs of less stringent T&Cs are emerging, driven by stronger competition and a gradual decline in underwriting discipline.
Fitch plans to review its global reinsurance sector outlook ahead of the industry’s annual Rendez-Vous de Septembre in Monte Carlo. The sector outlook remains ‘neutral’.
FAQ
Abundant capacity and rising competition have created a more competitive environment, allowing buyers to secure lower rates and improved terms. Although prices remain above historical averages, underwriting margins are under pressure from both price reductions and increased claims severity.
Risk-adjusted rates for loss-free property programs declined by approximately 10–15% on average at the July 1 renewals, continuing the trend seen earlier in the year.
Declining reinsurance prices, higher claims severity from natural catastrophes such as the Los Angeles wildfires, and looser T&Cs in property lines are all reducing underwriting margins. New business is being written at lower margins compared to previous years.
Excess supply of reinsurance capital relative to demand shifts pricing power toward buyers, particularly in property lines. This has led to more favorable outcomes for buyers who can demonstrate strategic improvements and differentiate themselves.
T&Cs have started to loosen, with reinsurers offering protection at lower attachment points, more frequent return periods, and working-layer or aggregate protections reemerging. This reflects increasing competition and a gradual decline in underwriting discipline.
Fitch maintains a ‘neutral’ outlook on the global reinsurance sector and plans to reassess it ahead of the annual Rendez-Vous de Septembre meeting in Monte Carlo, considering the ongoing pressure on prices and margins balanced by strong fundamentals.
Reinsurers have shown greater confidence and provided better outcomes to cedants who can clearly demonstrate and quantify actions to improve performance, such as revised claims practices or changes in business mix. Those unable to evidence improvements have faced less favorable terms.
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AUTHORS: Manuel Arrive, CFA – Director, Insurance at Fitch Ratings Ireland, Brian Schneider, CPA, CPCU, ARe – Senior Director, Insurance at Fitch Ratings, David Prowse – Senior Director, Fitch’s Credit Commentary & Research
