Loss-free accounts got cheaper reinsurance renewals: Report

Abundant reinsurance capital resulting from strong reinsurer performance led to rate decreases for loss-free accounts at July 1 renewals, according to a report Tuesday from Guy Carpenter & Co. LLC.

The market “easily” absorbed the 5% to 7% increase in client demand for property catastrophe limit as reinsurer capacity exceeded demand by more than 20%. That led to risk-adjusted rate decreases of 5% to 15% for “non-loss impacted” programs and risk-adjusted rate increases of 10% to 20% for “loss-impacted” programs.

Reinsurer capital has been bolstered by robust performance in the alternative capital sector, particularly insurance-linked securities in the form of catastrophe bonds. First-half new issuance of catastrophe bonds hit a record, as approximately $17 billion of limit was placed through 56 property catastrophe deals and one health catastrophe bond.

Despite substantial first-quarter catastrophe losses driven mainly by the January California wildfires, “strong reinsurer performance is expected to continue in 2025,” Guy Carpenter said. Reinsurer returns on equity were 16% in 2024 and are projected to be 15% this year.

Insured losses totaled nearly $70 billion through the first half of 2025 but have leveled off in the second quarter from the elevated first quarter, and losses for the first half of 2025 are now flat compared to the inflation-adjusted five-year average.

The current trading environment is one of the most favorable for reinsurers in many years, Guy Carpenter President and CEO Dean Klisura said in the report. “We see this as a tremendous opportunity to re-balance the market dynamics in our clients’ favor. More capacity will continue to moderate pricing,” he said.

Aon PLC said in a report Monday that abundant reinsurer and alternative capital had absorbed increased cedent demand for limit at mid-year renewals.