Growing market capacity and heightened competition are placing renewed pressure on reinsurance pricing, with Fitch Ratings warning that underwriting margins could narrow further in 2025 as claims severity rises and terms ease.
Fitch reported that pricing softened at the June and July renewals, extending the gradual declines recorded at the January and April rounds. Rates for loss-free property programs fell by 10%–15%, while US casualty pricing remained flat. Retrocession pricing declined, and coverage improved. Specialty lines showed varied trends, with cyber rates continuing to decrease and aviation rates staying stable.
Fitch said pricing remains above historical levels, but the combination of falling rates, increased claims severity from natural catastrophes, and looser terms in property lines is likely to result in lower underwriting margins next year. Natural catastrophe losses, including the Los Angeles wildfires and other events in the first half of 2025, are adding pressure to margins.
The financial effects of pricing reductions since mid-2024 are becoming evident as new business yields lower margins.
Fitch noted that this is partially offset by resilient investment income. The sector’s strong reserve adequacy allows reinsurers to manage earnings through favorable reserve developments across most business lines. However, some liability lines could encounter adverse reserve development driven by prolonged social inflation.
The global reinsurance market continues to show ample capacity, with supply growth exceeding incremental demand from cedants. This dynamic is shifting pricing power toward buyers, particularly in property reinsurance, while casualty lines remain more balanced. Fitch observed that competition remains focused on pricing rather than terms and conditions.
Revenue growth in property reinsurance is supported by increased risk awareness among cedants and higher insured values, leading to expanded coverage requirements. Reinsurer appetite for US casualty business remains mixed, with some carriers expanding participation while others reduce their exposure.
Terms and conditions are gradually loosening as reinsurers provide protection at lower attachment points and for more frequent return periods. Working-layer and aggregate covers are returning, and there is greater willingness to negotiate terms. Fitch attributed these developments to competition and gradual relaxation of underwriting discipline.
Fitch plans to review its global reinsurance sector outlook, currently neutral, ahead of the Rendez-Vous de Septembre in Monte Carlo.
What’s your perspective on how capacity and competition are affecting reinsurance pricing?
