Fitch Ratings has changed its outlook for the global reinsurance sector from “improving” to “neutral,” noting that the pricing cycle has likely peaked. However, profitability is expected to stay strong by historical standards through 2025.
Global reinsurance market delivered strong results in 2024 with further improvement in underwriting profitability, exceptional ROEs and a continued building of capital. Reinsurer capital buffers and reserve levels have improved, supported by record profits in 2023 and the first half of 2024.
Reinsurers are well-prepared for price declines, despite rising claims costs and increasing catastrophe losses driven by climate change.
With abundant capital in the reinsurance market, a slightly softer and more competitive market is anticipated for 2025, assuming loss activity in the second half of 2024 remains within normal ranges. Underlying margins are expected to stay near their 2023-2024 peak as reinsurers continue to apply disciplined underwriting.
Fitch projects a combined ratio of 88% for 2024 and forecasts a strong return on equity near 20% in the short term.
Fitch Ratings’ Global Reinsurance Forecasts
| $ bn | 2023 | 2024F | 2025F |
|---|---|---|---|
| Net premiums written | 162.8 | 173.4 | 183.8 |
| Catastrophe losses | 11.1 | 14.3 | 16.4 |
| Net prior-year favourable reserve development | 4.1 | 3.3 | 1.8 |
| Calendar-year combined ratio (%) | 87.3 | 88.2 | 90.2 |
| Accident-year combined ratio (%) | 89.9 | 90.1 | 91.2 |
| Accident-year combined ratio excluding catastrophes (%) | 83.0 | 81.8 | 82.2 |
| Shareholders’ equity (excluding Berkshire Hathaway) | 254.0 | 266.7 | 280.0 |
| Net income return on equity (excluding Berkshire Hathaway) (%) | 21.8 | 20.7 | 18.9 |
Market estimates of property catastrophe losses in 1H 2024 are just over $60 bn, significantly higher than average, driven by medium-sized peril events, including several convective storms in the US.
Most of the losses were absorbed by primary insurers due to higher attachment points, a situation that will persist in 2025 as reinsurers stay cautious on secondary peril exposure.
Climate change brings more frequent and extreme weather activity, making it harder for reinsurers to price catastrophe risk.
The global reinsurance market remains well-capitalized, with companies maintaining strong solvency positions. The sector has not faced significant pressure, except for unrealized losses on fixed-income investments, which have since reversed.
Fitch Ratings expect capitalisation to remain very strong, exceeding reinsurers’ stated targets and providing good headroom to absorb shocks.
P&C insurance market reserve buffers were strengthened in 2023, enhancing balance-sheet resilience and giving flexibility to smooth earnings. Favourable albeit declining overall loss development continues, driven by property and specialty reserve releases but partially offset by adverse development in casualty lines, mostly from 2016-2019.
by Yana Keller
