Morningstar DBRS says insurers and reinsurers chasing growth will run into one unavoidable problem: holding the line on underwriting discipline.
That warning comes even as global insured catastrophe losses hit $80bn in the first half of 2025, making it one of the most expensive opening six months in history.
The bulk of that total came from January’s wildfires in Los Angeles County, now the largest insured wildfire loss on record.
Wildfire risk hasn’t arrived overnight. Rising temperatures, long dry seasons, and housing expansion into fire-prone terrain have driven exposures higher over the past decade. Yet the pricing environment is sliding. Commercial property insurance rates dropped 7% in Q2 2025 versus a year earlier.
The same trend shows up in reinsurance. Guy Carpenter’s Global Property Rate-on-Line Index fell 8.1% through the first half of the year.
Ample capital—traditional balance sheets mixed with steady inflows of third-party money—has kept prices suppressed.
Morningstar DBRS flagged the instability of that outside capital. If a severe event triggers sudden withdrawals, rate corrections could come fast, echoing the turbulence of 2023. For now, traditional reinsurance capacity looks more durable, backed by profitable underwriting, retained earnings, and strong investment performance.
The firm expects a widening price gap between loss-affected and loss-free programs.
Insurers with wildfire exposure should prepare for higher attachment points, tighter aggregates, stricter wordings, and steeper costs. Renewals in 2025 already reflected that split, and 2026 will likely follow.
Primary carriers will feed those adjustments through to clients. Homeowners and businesses in catastrophe-hit regions should brace for higher premiums, while portfolios untouched by recent events may see terms hold steady or even tick slightly better.
The real test, according to Morningstar DBRS, is whether companies can keep writing business without losing discipline in the chase for volume. That’s the balance, and it’s harder than it looks.
