Optimism high in re/insurance following record results, yet challenges persist: EY

With the re/insurance industry returning to profitability and many firms achieving record results in 2024, there’s reason for optimism. However, key challenges like high inflation, climate change, and geopolitical instability persist, according to Isabelle Santenac, EY’s global insurance leader, and Rodney Bonnard, UK financial services market leader.

Speaking with Reinsurance News at the 66th Rendez-Vous de Septembre (RVS) in Monte Carlo, Santenac and Bonnard both observed there are many reasons to be optimistic following a “turning point” for the industry in recent years, with hardening rates boosting reinsurance profitability.

Despite this, Santenac noted that there are some headwinds going into 2025, particularly around whether pricing will continue to increase at the same pace.

She also highlighted social inflation in the US, alongside evolving risks such as cyber security, climate change, and further geopolitical challenges.

Santenac added, “Although it is starting to fall, inflation remains high and continues to impact the global insurance sector. In addition, changing political landscapes – particularly with the upcoming US election – and tensions in the middle east and between the West and China are driving ongoing uncertainty.”

Bonnard additionally noted that there is a lack of new capital entering the market, with both existing players and startups struggling to attract fresh investment. He explained that “investment in insurers hasn’t delivered the performance over recent years to compete with alternative approaches requiring less capital – such as investing in MGAs and brokers.”

Discussing M&A, Bonnard remarked that it was “very hard” to get transactions done during the course of 2023, adding that the financing costs with higher interest rates had made it more challenging. However, Bonnard went on to say that M&A activity had picked-up during the first half of 2024 as signs of economic recovery lifted market confidence, with both the volume and value of transactions up from the same period the year before.

Looking ahead to 2025, Bonnard continued, “We expect M&A activity to continue to increase next year, provided the economic outlook continues to improve. We also expect to see more broker consolidation as investors focus on international expansion, in addition to bringing together smaller players across more fragmented markets to create synergies, scale and value.”

Closing the interview, Santenac emphasised the importance of the industry maintaining discipline, in other words, controlling rate cuts and coverage levels.

“We’ve heard a lot about firms maintaining discipline here at RVS this year, ensuring the industry doesn’t become complacent because of the good results,” she concluded.

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