Fitch Ratings has revised its global reinsurance sector outlook to ‘neutral’ from ‘improving’, noting that the pricing cycle has most likely passed its peak, though profitability should remain very strong in 2025 by historical standards.
The global ratings agency projected that “given the sector’s abundance of capital, we expect a moderately softer and more competitive market in 2025, barring significantly above-average loss activity in H2 2024.”
According to a news report from Reinsurance News, an industry-focused on line medium, Fitch maintained that, however, underlying margins would likely to remain close to their 2023-2024 peak as reinsurers maintain their underwriting discipline.
Fitch forecasts the sector’s calendar-year combined ratio to be 88% for 2024 while its near-term return on equity will be very strong, at close to 20%.
Similarly, it predicted that the sector’s net premiums written were anticipated to stand at around $173 billion, with catastrophe losses of $14.3 billion.
According to the rating agency, market estimates of property catastrophe losses in H1 2024 are just over $60 billion, which is significantly higher than average, driven by medium-sized peril events, including several convective storms in the US.
It clarified: “Most of the losses were absorbed by primary insurers due to higher attachment points, a situation that will persist in 2025 as reinsurers stay cautious on secondary peril exposure,” Fitch added.
“We expect capitalisation to remain very strong, exceeding reinsurers’ stated targets and providing good headroom to absorb shocks.
“Property and casualty reserve buffers were strengthened in 2023, enhancing balance-sheet resilience and giving flexibility to smooth earnings.
“Favourable albeit declining overall loss development continues, driven by property and specialty reserve releases but partially offset by adverse development in casualty lines, mostly from 2016-2019”, Fitch added.
