According to Evercore’s reinsurance renewals report, growth in dedicated reinsurance capital is expected to outstrip growth in demand, resulting in pressure being put on property catastrophe pricing that will likely accelerate throughout 2025.
The firm noted that capital levels continue to increase and have reached new heights in 2024.
At the same time, data from reinsurance broker Gallagher Re showed that reinsurance dedicated capital increased once again to a new highpoint, up +5.4% at H1’24 from year-end 2023, and up +8% YoY from H1’23 $709 billion.
Moreover, in their own 1.1.2025 report, Guy Carpenter highlighted a +10-15% increase seen in capacity with only a +5% increase in demand, while in their own respective renewals report, global reinsurance and insurance broker Aon also estimated that global property reinsurance demand will likely grow by +5% in 2025, following a +10% increase in 2024.
According to Evercore, +5% growth in property reinsurance demand globally is lower than the +10% seen at 1.1.2024, as well as the +8% and +12% YoY increases at H1’24 noted in both Gallagher Re and Aon’s reports on dedicated reinsurance capital.
“With increased capacity in the market outweighing demand, and our view of a peaked property cat opportunity and cautious environment in casualty, competition for deployable opportunities is more intense in 2025 as more capital vies for deployable opportunities,” Evercore commented.
Analysts also flagged how reinsurance is becoming more competitive, with property cat pricing down 10% at this years renewals – which is in line with recent reports from Guy Carpenter, Aon, Gallagher Re and Howden which ranged from down -5 to -15%.
Looking back at last year’s June reinsurance renewals, discipline was maintained, primarily due to predictions calling for an active storm season which preliminarily does not appear to be the case in ’2025, potentially resulting in more pricing pressure as the year progresses and capital builds.
In fact, an early long-range forecast for the 2025 Atlantic hurricane season which was released in December, with Tropical Storm Risk (TSR), projects that there could wind up being 15 named storms, 7 hurricanes, as well as 3 major hurricanes during this years season.
If that turned out to be the case, this would roughly align with the 30-year norm, and sit below the 2024 predicted levels.
“While terms and conditions are holding firm (i.e. higher attachment points) and rate levels are still solid, we believe the growth will slow, ROEs will deteriorate and cause P/BV de-rating. RNR is most exposed to a moderation in returns as pricing moderates, followed by EG,” Evercore added.
“We estimate growth will slow by more than expected across the reinsurers although this is likely going to be slightly offset by capital return.”
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