Favorable reinsurance market conditions to continue despite being past the ‘super cycle’ peak: Autonomous

The re/insurance market is experiencing a shift, with the peak of the current “super cycle” now behind. Yet, while it is believed it will continue a moderate decline, optimism remains about continued favourable conditions, Autonomous stated in a recent report.

This cycle appears to be very different to prior ones, analysts highlight. Although Hurricane Ian in 2022 significantly reset market conditions, the hard market arguably began in 2017.

After years of declining prices, the severe hurricane losses of 2017 served to stop that trend, as reinsurers attempted to address low ROE adequacy, and started seven successive years of pricing improvement.

Additionally, the strong performance of primary markets in recent years further supported favourable reinsurance pricing and margins, analysts noted.

Autonomous stated: “This ‘super’ cycle appears unlike others, and has not suffered the historical cliff edge after a spike in pricing, but rather it has experienced a plateau (2024) followed by a soft landing (2025).

“We acknowledge the peak of the cycle has now passed, and while we think the cycle will continue its modest downward path, we do not see the end of the current favourable conditions.”

The recent January 1 renewals, a key date for the reinsurance market. For the four major reinsurers – Munich Re, Swiss Re, Hannover Re, and SCOR – this date marks the renewal of roughly 45% of their combined Property & Casualty reinsurance premiums.

Following the significant re- pricing seen in recent years and a steady mid-year renewal season in 2024, the anticipation was for pricing to decrease heading into the January 1 renewal.

Reinsurers faced manageable impacts from hurricanes Helene and Milton, with the industry debating how much pricing would fall, and how broad the declines would be.

The focus shifted to the extent of pricing declines, which ended up being modest, according to analysts, with mid-single digit decreases reported, varying based on individual loss experiences.

“Naturally the question currently is whether the fortunes of reinsurance have structurally shifted, or merely reflects the current stage in the cycle. The headlines from the 1/1s offer various puts and takes, but ultimately we see discipline broadly prevailing, particularly it should be noted, after the strong price increases pushed through in both 2023 and 2024,” Autonomous said.

Adding: “Pricing does appear “officially” past the peak, although this varies greatly by geography, line and performance. For property-catastrophe — the headline generating class — rates appear down as much as 10% for loss free accounts, while loss impacted accounts still had to stomach increases of up to 15% .”

The 1/1 renewals have shown a shift in power has occurred on terms, which have remained largely unchanged from the 2023 “great reset,” with attachment points and retentions remaining the same.

“However, only part of the shift in relationship between primary insurer and reinsurer since 2023 has been driven by price. There has also been a notable change in how reinsurers have managed frequency, severity, and breadth of natural catastrophes,” analysts commented.

The health of the primary insurance market is also contributing to the outlook for reinsurers, therefore it is also important to monitor its dynamics, Autonomous concluded.

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