Property cat ROEs ‘still very attractive’, rate declines not always across the board: Arch CEO

Bermuda headquartered insurance and reinsurance company, Arch Capital Group Ltd., expanded its property catastrophe reinsurance writings, particularly in Florida, during the second quarter of 2025, and Chief Executive Officer (CEO), Nicolas Papadopoulo, believes that ROEs in the line remain “very attractive.”

Group-wide, , reporting a 15% rise in net premiums written (NPW) to $4.4 billion, and a 22% increase in net premiums earned (NPE) to $4.3 billion.

Within Arch’s reinsurance operations, GPW increased 9% year-on-year to $3.2 billion, NPW jumped 6% to $2.1 billion, and NPE rose by 17% to $2.1 billion.

The carrier revealed in its earnings release that reinsurance premium growth reflects increases in most lines of business, in part owing to rate increases, new business opportunities, and growth in existing accounts.

During Arch’s Q2’25 earnings call, CEO Papadopoulo commented on the performance of the reinsurance segment in his opening remarks, highlighting a strong quarter of results and top-line expansion.

“The underlying business is attractive with gross written premium increasing 8.7% compared to the second quarter of 2024,” said Papadopoulo. “We grew our casualty reinsurance premium year-over-year, supported by selective new business and rate improvements. We also expanded our property catastrophe writings, particularly in Florida, where we identified attractive risk-adjusted returns and responded to increased clients demand for additional limits.”

Give the expansion in property cat reinsurance, at a time when pricing has come down from the highs of 2023, the Arch CEO was questioned on how he views ROEs in terms of risk reward.

“Our belief is that ROEs are still very attractive,” he said. “And just to clarify, I think the price decreases, in my view, are not always across the board.”

“I think, for instance, in Florida, what we’ve seen is most of the competition is really on the high end of layers, and at this renewal, I think the FHCF move up their attachment points. So, there was a need for capacity below the FHCF… I think we actually were able to write more below, above and by the side because we are able to write across the board. And below the FHCF, I think the price decreases were pretty flat.”

Importantly, Papadopoulo noted that although there’s clearly been rate decreases in this line of business over the past year, Arch still views it as “really attractive.”

Throughout Q2’25 earnings, so far, the message from a number of leaders has been that although rates have come down from previous highs, it’s important to remember that they’re coming off a high base, so remain attractive enough for reinsurers to push for growth amid strong demand from buyers. As one CEO put it, so while rates have softened, it’s by no means a soft property or property cat marketplace.

During the Arch Q2’25 earnings call, Papadopoulo was pushed for more colour on the Florida market and whether growth was driven by reforms.

“The tort reform had an impact, I think, on the assigned benefits. So, we’ve seen the local companies’ attritional loss ratio dropping from the 50s plus to now in the 20s,” said the CEO. “… We mostly write excess of loss in Florida. The nice thing for us is that it affords them the money to buy the reinsurance they need to protect the capital investors have put in those companies.”

He went on to note that some storms have also hit Florida in recent times, which combined with the reforms, has made the market more attractive on an excess of loss basis.

Papadopoulo explained that Arch was generally pleased with the state of the mid-year catastrophe excess of loss renewals, highlighting that while pricing was slightly down year-on-year, terms and conditions were stable with primary insurers maintaining high retentions.

“Overall, catastrophe excess of loss margin remained attractive. The broader reinsurance market continued to exhibit discipline. We are growing selectively, focusing on areas where margins are attractive. We are committed to pursuing the brightest opportunities, those offering the strongest risk-adjusted return,” he said.

As well as growing in property cat, Arch also grew its casualty reinsurance book in the quarter on the back of selective new business and rate improvements.

In light of this, the CEO was quizzed on his thoughts on the casualty reinsurance space and rates in particular.

“The casualty business, I think it’s mostly quota share. So, I think the story on the primary side and the reinsurance side, as far as the underlying business, is very similar. And there, I think we’ve seen rates, as you said, probably exceeding trends,” he said.

“We are selectively growing both on the insurance and trying to grow on the reinsurance. I think where you see the difference in market behaviour, I think there is a lot of supply on the reinsurance side, and it’s difficult for many in the market to expand their writings because a lot of the competition is also looking to expand,” added Papadopoulo.