Moody’s insurance executives have identified U.S. casualty reserve development as the biggest uncertainty for reinsurers in 2025, according to TD Cowen analysts.
Following discussions with Moody’s about its property and casualty outlook for 2025, TD Cowen reported that the rating agency expects the strong profitability seen in reinsurance to continue.
While property catastrophe reinsurance pricing declined at January 1 renewals, it remains attractive after years of significant increases, TD Cowen noted. The firm added that higher attachment points introduced in 2023 significantly improved industry profitability, and reinsurers have largely maintained these levels in 2025.
However, similar to primary commercial insurers, the biggest risk for reinsurers remains U.S. casualty reserve development.
The U.S. Property & casualty insurance market faces rising loss costs, driven by inflation, severe weather events, and litigation trends. Personal lines insurers experienced significant underwriting losses in 2024, primarily due to secondary perils like storms and wildfires, while commercial lines achieved profits through rate increases and advanced risk selection.
Regulatory variations and inflation continue to influence rate approvals and claims costs, particularly in personal auto and homeowners insurance, according to AM Best.
In the United States, Property & casualty insurers file a special statement with the National Association of Insurance Commissioners. The filing is designed to determine premiums and losses by lines of business and to give an accurate view of the insurer’s reserving for loss.
U.S. property and casualty insurers have had to contend with rising loss costs, above-average catastrophe activity, adverse trends in personal auto, more frequent (nonpeak) peril loss events, social inflation and litigation financing, and regulatory constraints, according to a Best’s Report.
TD Cowen analysts stated that their conversation with Moody’s reinforced their sector outlook, recently detailed in their 2025 P&C industry report. While they hold a mixed view on the industry due to casualty reserve concerns, they favor specialty, personal lines, and brokerage sub-sectors.
Moody’s expects commercial lines carriers to maintain combined ratios in the upper 90s, benefiting from years of rate hikes despite social inflation concerns and declining rates in some areas.
Additionally, the rating agency highlighted that casualty loss trends remain elevated as litigation costs continue rising.
Moody’s pointed to ongoing issues with social inflation, including higher jury awards, increased litigation, and a more aggressive plaintiff’s bar. The firm expressed concerns about whether casualty pricing is keeping up with loss cost trends.
The agency warned that casualty reserves might be inadequate for accident years 2022-2024, particularly in troubled lines where insurers may not have accounted for enough social inflation. However, adverse development in these areas is expected to be partially offset by continued favorable trends in workers’ compensation.