Global reinsurers set to keep profits high in 2025

This is forecast to happen despite lower rates in the January renewals.

Global reinsurers are expected to maintain strong profitability in 2025, despite a decline in risk-adjusted prices for most lines of business during the 1 January renewals, according to Fitch Ratings. 

The decline in prices reflects ample capital availability and a softening reinsurance cycle. 

However, market conditions remain conducive to solid returns, with the combined ratio projected to hover around 90% and return on equity forecasted to slightly decrease to 17%, down from 19% in 2024.

Fitch has maintained a neutral outlook for the sector. Reinsurers entered 2025 with robust capital buffers and reserve adequacy, bolstered by record profits over the past two years. 

Capitalisation was further enhanced by contributions from traditional reinsurers and institutional investors drawn by strong underwriting returns. 

The increased appetite for growth and risk amongst reinsurers contributed to the price reductions, although contract terms and conditions remained largely unchanged, preserving the structural improvements achieved in recent years. 

Despite lower rates, premium income is expected to rise in 2025 due to higher volumes.

Natural catastrophe losses in 2024 totalled approximately $140b, marking the fifth consecutive year of insured losses exceeding $100b. 

Losses were driven by hurricanes and severe convective storms ($50b each) and medium-sized events such as European and Middle Eastern floods ($13b). 

Primary insurers absorbed 85%-90% of these losses due to higher attachment points, a trend expected to persist as reinsurers remain cautious about secondary peril exposure.

Property reinsurance prices for loss-free accounts fell by 5% to 15%, with the largest reductions in high-attaching layers, whilst loss-affected regions saw rate increases of up to 20%.

In speciality insurance, renewal prices remained stable or slightly lower, whilst the US casualty rates were flat or slightly higher depending on cedents' loss experience and portfolio mix.

Capacity in casualty insurance was more constrained than in property and specialty lines, with ceding commissions generally flat or slightly reduced.

Reinsurance sector capital has grown by more than 20% since its 2022 low, supported by improved earnings and higher asset values. 

Alternative reinsurance capacity has also expanded, fueled by favourable conditions for property catastrophe risks and cyber catastrophe bond issuance. This growth strengthens the sector's ability to manage earnings volatility.