Capacity & competition put further pressure on prices after 2024 peak: Fitch

Abundant capacity and intensifying competition among reinsurers are driving softer pricing at the June and July renewals, reinforcing Fitch Ratings’ expectation that market pressures will continue to weigh on prices beyond their 2024 peak.

According to the ratings agency, pricing across most reinsurance lines continued to fall at the mid-year renewals, as it had at January and April, with rates for loss-free property programmes falling by 10%–15%.

In light of this, Fitch expects that falling prices, rising claims severity from natural catastrophe events, and slightly relaxed property terms and conditions will likely compress underwriting margins in 2025.

“The global reinsurance market has ample capacity as rising supply outpaces incremental demand from cedants. This is shifting pricing power to be in favour of reinsurance buyers, particularly in property lines, while the balance remains more even in casualty,” the rating agency said.

Fitch continued, “Competition is generally focused on price rather than T&Cs. Property reinsurance revenue growth is underpinned by increased risk awareness among cedants and higher insured values, leading to increased coverage. Reinsurer appetite to write US casualty cover is mixed, with some reinsurers increasing their appetite and others withdrawing.

“T&Cs are beginning to loosen as reinsurers become more willing to provide protection lower down on programmes, including at lower attachment points and for more frequent return periods.

“Working-layer and aggregate reinsurance protection are making a comeback, and reinsurers are becoming more open to negotiating T&Cs.

“The first signs of less stringent T&Cs are emerging, driven by heightened competition and a very gradual relaxation of underwriting discipline.”

Despite all this, Fitch noted that pricing remains above historical levels, and sector fundamentals still support strong, albeit off-peak, profitability.

Still, as Reinsurance News understands, reinsurers may need to strike a careful balance between growth and underwriting discipline to preserve margins and capital strength through 2025 and beyond.

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