Berenberg, a private bank and financial institution in Europe, has released new analysis highlighting a clear trend across the London insurance market: stronger pricing discipline is holding, driven by structural changes in the global reinsurance space.
The shift follows a period of elevated natural catastrophe losses, which prompted a reassessment of risk across the industry and has since influenced pricing strategies from reinsurers down to primary carriers.
Berenberg notes that the past decade has seen a material increase in catastrophe-related insured losses, with five-year averages rising by 15% in the mid-2010s and then jumping 30% in the early 2020s.
These rising losses initially strained performance but eventually triggered a necessary correction in pricing. This tightening of conditions—originating at the reinsurance level—has had a steady influence on primary markets, reinforcing a more cautious and sustainable underwriting approach.
Looking ahead, data from Swiss Re cited in Berenberg’s report points to a continued upward trend in global insured catastrophe losses. Forecasts suggest annual real-term growth of 5–7%, potentially reaching USD 145 billion by 2025. Swiss Re also places a 10% probability on total insured losses exceeding USD 300 billion in the same year.
Already, the start of 2025 has brought significant financial impact, with wildfires in Los Angeles estimated to have caused USD 40 billion in insured losses—a record high. Berenberg views these projections as further justification for the sector to maintain firm pricing and terms to safeguard profitability.
Reinsurance capital has continued to expand, but Berenberg sees the market remaining disciplined overall. Figures from Guy Carpenter show that dedicated reinsurance capital hit a record USD 620 billion in 2024, reflecting a compound annual growth rate of around 6% since 2012.
While alternative capital has also increased, its share of the market remains stable, generally within the historical 15–22% range.
According to Berenberg, a sudden surge in alternative capital would be a key risk for the sector, potentially weakening the pricing stance of traditional reinsurers and leading to concessions that ripple through to primary insurers.
However, such a scenario has not yet materialised. Berenberg points to the capital-to-premiums ratio as a reliable measure of market conditions.
This metric, currently just over 1.1x, has recovered from 2022 lows but remains well below the 1.4x average seen from 2011 to 2021. Berenberg attributes this to ongoing capital discipline and robust pricing, noting that while the ratio may rise slightly by year-end due to modest capital inflows and slight pricing softening, it is likely to stay beneath the long-term average.
Berenberg’s assessment suggests the sector is navigating current challenges without compromising underwriting integrity. While some market dynamics are shifting, the foundation of reinsurance-led pricing discipline appears intact for 2025.
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