RVS 2025: Talking points for Monte Carlo

It always comes down to pricing, and the current assumption is for continued gentle softening, writes David Benyon, unless the reinsurance market gets a big shock between now and 1/1.

Reinsurers appear confident in the main about upcoming 1 January renewals. That doesn’t mean a hard market, but ongoing price adequacy as the market continues to soften.

They have already conceded softening prices at several prior renewals, at the last 1/1, then in April, June and July 2025. That said, they feel they have gained the space, in price adequacy, terms to do this.

The magnitude of the steep rate rises experienced by buyers in 2023 and 2024, when years of pricing inadequacy were suddenly readjusted in reinsurers’ favour, created this situation. Two years of handsome profits for reinsurers, without a market-turning combination of hurricanes and other catastrophe events, has continued this situation.

Prices have slipped, but attachment points that were reset much higher when the market turn occurred, are largely still in place, meaning that catastrophe events when they have occurred, including recent hurricanes, storms and wildfires, have led to losses that were largely retained by insurers, with less of the bill transferred to reinsurance level.

This is what reinsurers talk about when they say they are disciplined, while acknowledging the forces of supply and demand, as entering capital means continued competition and excess capacity.

Reinsurers feel they have built up considerable gains in a few years of good pricing with limited cat losses. They will accept gentle price reductions or softened terms. Why fight the wind?

Casualty caution

Reports published by the big reinsurance brokers to tell the story of previous renewals have accepted that reinsurers’ nervy attitude towards US casualty business has not shifted along with the overall narrative for softening property rates.

The casualty picture is always complicated by its range of primary lines, from workers’ compensation to directors’ and officers’ liability, all of which have tail risk that requires years of reserving and are subject to US market litigiousness and forces of social inflation.

Loss volatility among US insurers, and efforts to prop up reserving levels at some large carriers, have helped to maintained reinsurers’ caution about taking on additional US casualty exposure. Whether reinsurance capacity wants to compete for this business will become evident at 1/1.

Specialty diversification

Still a relatively small slice of the pie relative to property cat exposures, reinsurers have been keen to underwrite more specialty lines risks at recent renewals as a source of diversification and because premiums are growing strongly at primary level as a source of business.

Specialty includes a huge array of lines of business, many of which are emerging risks, such as the industry growth engine of cyber insurance. Other specialty lines are also particularly subject to volatility, such as political violence or marine and energy business.

While reinsurance pricing will more than likely be soft for most specialty business, the question is how much of an appetite reinsurers have, and consequently how soft the market will go in search of diversification, into risks that are both volatile and under modelled?

Horizon scanning

The sudden appearance of a huge hurricane making a Florida landfall can instantaneously transform the conversation at the Monte Carlo rendezvous, or indeed render much of it irrelevant, should a storm strike the US east coast in the weeks that follow.

The insurance market experienced two serious Florida hurricane as loss events last year – hurricanes Milton and Helene.

Evidence suggests that any reinsurance market-turning storm would need to take a more destructive path than those experienced in the past year in order to meaningfully move the dial going into next year’s 1/1.