Turning the tide – 1.1 reinsurance renewals digested

Ian Summers, Global Business Leader, AdvantageGo, reviews the 1 January reinsurance renewals, subject of a special report published by AdvantageGo.

It was always going to be a case of not if, but when, the market would turn after the intense hard market witnessed in recent years, and sure enough the 2025 1.1 reinsurance renewals have been just that moment. In many ways this has been flagged for some time, with a number of programmes renewing throughout mid-2024 signalling which way the waters would run, and the direction of travel is now clear.

According to Guy Carpenter, strong reinsurer appetite and expansion in available reinsurance capacity saw non-loss impacted property catastrophe renewals experience notable risk-adjusted rate reductions in the 5%-15% range.

An interesting dynamic here, it added, was that property catastrophe renewals were consistently oversubscribed as reinsurer appetite increased by 10%-15%, while demand only increased by some 5%.

Indeed, the supply and demand axis has been crucial in determining rate outcomes across the property casualty space at this renewal season, with Aon estimating that global reinsurer capital grew to a new record high of some $715 billion at 30 September 2024, a substantive increase of $45 billion compared to the end of 2023, with growth mainly driven by retained earnings.

What’s also clear is that the global trading environment remains volatile, with the considerable macroeconomic pressures and geopolitical turbulence of 2024 set to continue this year, as inflationary pressures still lurk and supply chains are under pressure, with wars in Ukraine and the Middle East still ongoing. This will also be a year, of course, in which the eyes of the world will be focused on the direction set to be taken by incoming US President Trump in his second term in office.

Given this context, for cedants and reinsurers alike, having a clear and granular understanding of risk remains at the heart of all renewals. Here, our proven underwriting tool workbench is now firmly embedded in the market, creating the clarity and data analytical insights which remain at the heart of all renewal discussions.

Soft market consensus

After some extremely encouraging profits in recent years, the post-renewals consensus appears to be that the reinsurance market is still in good shape. Indeed. according to Aon’s latest Capital Poll, most US insurers expect to exceed a growth rate of 5% in 2025, with a quarter growth expected at 11% or higher in 2025.

What’s clear is that the reinsurance rating tide has decisively turned now, and we appear to be in for a soft market for some time to come. Indeed, in a recent note, equity analysts at UK investment bank Peel Hunt said they have factored in the potential for reinsurance rates to decline by some 35% over the next five years, explaining that it has factored a softening cycle into its outlook for the reinsurers it covers.

Seasoned market observers will know that external events could always upset the apple cart here, but it’s fair to assume that buyers are once again in a more comfortable position, and that reinsurers need to demonstrate prudence and ensure they are not gunning for market share at the expense of excessive rate loss and over-generous covers – a dynamic which unfortunately the market has been all too guilty of coming out of previous hard market cycles.

Read the full report here – 1.1 Reinsurance Renewals 2025: Winds of Change – A Shifting Landscape