Re/insurance executives remain cautiously optimistic about 2025, though expectations vary between property catastrophe and casualty lines, according to KBW analysts at the AIFA conference.
Property catastrophe reinsurance is expected to deliver stable returns, while casualty markets face pressure from social inflation, limiting premium growth.
KBW noted that reinsurance executives remain confident in property catastrophe reinsurance returns, with attachment points holding steady and only slight rate decreases reversing previous sharp increases.
Executives highlighted sufficient capital to meet rising demand, including backup coverage for smaller cedents affected by California wildfires.
However, a tightening of terms and conditions could restrict cedents’ ability to classify catastrophe events flexibly.
By contrast, most executives remain hesitant about casualty reinsurance. Market pricing, especially ceding commissions on quota share policies, does not fully account for social inflation, prompting widespread reserve strengthening.
One executive suggested that the worst effects of social inflation have yet to be fully recognized. This could drive further increases in primary casualty rates and, eventually, impact casualty reinsurance pricing.
Until then, cedents will face stricter selection criteria, and casualty reinsurance premium growth will likely remain limited, mainly reflecting higher primary rates.
KBW also addressed Bermuda’s tax landscape, noting that most Bermudian reinsurers expect deferred tax assets (DTAs) booked in late 2023 to be reversed within two years.
None of the companies KBW met expressed concerns about capital adequacy, and many remain open to share repurchases if premium growth opportunities remain limited.
Current Bermuda tax laws allow companies to use DTAs, but at some point—possibly later this year—regulators may introduce offsets, such as lower payroll or property taxes, to balance the impact of corporate income tax. However, KBW does not expect these changes in the first half of 2025.
Despite ongoing challenges in casualty, the overall sentiment among P&C re/insurers at the conference was cautiously optimistic.
KBW expects share price gains for well-reserved re/insurers that can seize market opportunities and manage risks, as well as for brokers positioned to outperform despite slowing organic revenue growth.
