Bolstered capital from strong earnings in 2024 led to ample capacity and strong reinsurer capital positions, contributing to a more orderly renewal season despite ongoing challenges from natural catastrophes and adverse casualty trends, according to S&P.
S&P analysts noted that the January 1, 2025, reinsurance renewals marked a return to normal market conditions after two years of volatility.
In contrast to the sharp increase in property and property catastrophe reinsurance pricing during prior years, this renewal cycle proceeded in a more orderly manner. Reinsurers, supported by two consecutive years of strong returns, entered 2025 with greater confidence and a willingness to deploy capital.
S&P’s outlook for the global reinsurance sector remains stable, reflecting expected credit trends, sector-wide risks, and emerging challenges over the next 12 months. The report highlighted downward pricing pressure in property and catastrophe lines, primarily driven by strong earnings and abundant capital.
Strong underwriting performance in short-tail lines, higher net investment income, and asset value recovery contributed to strong 2024 operating earnings. These factors further reinforced the industry’s capital position.
The casualty reinsurance market also shows signs of stability, though reserve volatility remains a concern. Analysts warned that unfavorable casualty loss reserve developments pose a key risk to reinsurers. Inflation-related challenges persist, with economic inflation easing but social inflation—rising litigation costs and higher jury awards, particularly in the U.S.—continuing to pressure reserves.
Reinsurers will absorb a significant share of losses from the California wildfires, which could become the largest insured wildfire event in history. Loss estimates range between $20 bn and $50 bn, with approximately 80%-85% of insured losses coming from personal lines and 15%-20% from commercial lines.
S&P Global Ratings expects reinsurers to maintain strong capital positions and post solid results in 2025 despite catastrophe losses.
Analysts anticipate firm pricing in short-tail lines through the remaining renewals this year. However, reinsurers will continue facing elevated natural catastrophe risks and inflation-driven pressure on casualty loss reserves, which remain key concerns for the industry.