Currently, there is increased capital in the market, fuelled by two years of robust returns at reinsurers, coupled with higher alternative capacity. This surplus is driving competition and downward pressure on pricing.

Additionally, while the LA wildfires in the first quarter of 2025 boosted reinsurance demand, the event did not materially change reinsurance pricing trends, but became a tailwind for demand.

This has made reinsurers to remain hesitant to bring down attachment points or reduce prices on lower layers of reinsurance towers, according to the P&C Insurance 2026 Outlook – Reinsurance report.

In 2025, global/European renewals (January 1 2025), Japan/Asia renewals (April 1 2025), and mid-year 2025 renewals (Florida, Gulf, Bermuda) saw roughly 5-15% price cuts.

“We estimate that reinsurance prices declined a further 15-20% with 1/1/26 renewals and, barring elevated cat losses, expect prices to remain soft through 4/1 and mid-year 2026 renewals. Reinsurers have generated robust returns in recent years, but we project ROEs in the business to compress closer to 10% in 2026 (higher for top-tier underwriters such as ACGL and RNR),” J.P. Morgan analysts stated.

Highlighting: “In our view, reinsurance prices are unlikely to turn positive unless the P&C sector faces insured losses of $100 billion or higher. On a positive note, declining reinsurance prices present a tailwind for primary carriers, most of which reduced their reinsurance coverage with the spike in prices in 2023.”

For the fourth quarter of 2025, J.P. Morgan expects benign catastrophe losses to boost results for re/insurance underwriters. Analysts predict the U.S. insurance industry will incur cat losses of roughly $5 billion in the period, down from $10 billion in Q3 2025 and $30 billion in Q4 2024.

The major drivers of U.S. catastrophe losses in this period were severe convective storms, winter storms, and floods across the Northeast, Mid-West, and Mid-Atlantic portions of the country.

“We believe that primary insurers will bear a considerable proportion of these losses given higher attachment points and retentions. Outside of the U.S., we expect losses from Hurricane Melissa, Typhoon Koto, Tropical Storm Senyar, Tropical Storm Ditwah, and storms across Europe and the Middle East,” said analysts.

Adding: “For companies that disclose intra-quarter data, both ALL (The Allstate Corporation) and PGR (The Progressive Corporation) reported catastrophe losses below our initial estimates for October and November. ALL reported pre-tax catastrophe losses of $83 million in October and $46 million in November. Consequently, we reduced our 4Q25 catastrophe loss projection for ALL (from $1.3 billion to $0.3 billion).”

As PGR reported $42 million of cat losses in October and $41 million in November. J.P. Morgan lowered its cat loss assumption for PGR from $386 million to $135 million.

Among the companies covered by J.P. Morgan, ALL and TRV (Travelers) are the most exposed to U.S. catastrophe risk on the primary side, while RNR (RenaissanceRe) and ACGL (Arch Capital Group) have the most exposure among reinsurers.

Meanwhile, AIG (American International Group) and CB (Chubb) are the most exposed to international catastrophe losses.

In recent years, primary insurers have absorbed a higher proportion of cat losses than historically, following changes in terms/conditions with 1/1/23 renewals – the reverse was for reinsurers.

However, analysts noted, this trend is now beginning to reverse, moving toward pre-2023 patterns.

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This “reflects healthy attritional performance and a low natural cat loss ratio for all reinsurers as market conditions remain favourable.”

Reinsurers benefitted from a combination of factors, including the continued earn-through of past rate increases, stable terms and conditions, and large losses that were within or below budget.

The discounting of claims under IFRS 17 reduced combined ratios by close to 9pp on average in the first half of 2025, a substantially greater benefit than in the first half of 2024.

While the sector as a whole thrived, individual company results varied. Munich Re maintained the best P&C combined ratio among its peers, despite a slight deterioration.

Its ratio, which now excludes especially business, remains well below its annual target, supported by a large and diversified portfolio. The company’s decision not to add to its reserves in H1 2025 helped to produce a positive run-off result, Fitch noted.

Hannover Re’s ratio worsened to 88.4%, slightly missing its target. This was primarily due to increased prudence in reserving, which surpassed the benefit from a favourable underlying reserves run-off.

Large losses from man-made events that were slightly above budget also contributed to this outcome.

Hannover Re, SCOR and Swiss Re used strong underwriting results to build up reserves, in line with their stated strategies, which Fitch views positively for assessing reserves adequacy.

Munich Re did not add to its reserves prudency in H1 2025, which supported a positive run-off result.

Fitch concluded: “Net favourable prior-year developments were partially offset (Swiss Re) or fully offset (Hannover Re) by precautionary additions to reserves. Both Munich Re and Hannover Re have previously had substantial reserves buffers, having started to reserve at ‘best estimates’ plus a margin earlier than Swiss Re and SCOR.”

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While property catastrophe reinsurance appears poised for steady returns, social inflation continues to cast a shadow over casualty markets which are expected to experience limited premium growth.

KBW said: “Reinsurance executives remain confident about expected property catastrophe reinsurance returns, as attachment points hold steady and small rate decreases only modestly reverse prior years’ more dramatic rate increases.”

Executives cited sufficient capital to meet growing demand, including back-up covers for some smaller cedents impacted by California wildfires. However, a slight tightening of terms and conditions is anticipated, potentially limiting cedents’ flexibility in classifying catastrophe events.

In comparison, most executives remain broadly cautious about writing casualty reinsurance, analysts highlighted.

Market pricing, particularly ceding commissions on quota share policies, is not adequately reflecting the persistent challenges of social inflation, which has led to widespread reserve strengthening.

KBW stated: “One reinsurance executive suggested that the industry hasn’t seen (we’d probably use the word ‘acknowledged’) the worst of social inflation yet, which should sustain or accelerate significant primary casualty rate increases, and should also eventually – but has not yet – manifest itself in casualty reinsurance pricing.

“In the interim, we expect very careful cedent selection and limited casualty reinsurance premium growth that mostly reflects higher primary casualty rates.”

Analysts also touched on the Bermuda tax landscape, noting that most Bermudian reinsurers are anticipating the eventual reversal of deferred tax assets (DTAs) booked in late 2023, with a common timeframe of two years.

According to KBW: “None of the companies we met with are worried about current or prospective capital adequacy, and most are open to share repurchases in the absence of meaningful premium growth opportunities.

“In the interim, Bermuda tax law allows companies to utilize their legally established DTAs. At some point (possibly later this year), Bermudian regulators will identify offsets – like lower payroll or property taxes to ‘compensate’ Bermudian companies for the corporate income tax – that should lower the (re)insurers’ expenses (potentially retroactively), but we think that’s unlikely to emerge in 1H25.”

Despite the challenges in casualty, the overall sentiment among P&C re/insurers at the conference was cautiously optimistic for 2025.

KBW expects share price outperformance across P&C for well-reserved re/insurers that can capitalise on market opportunities and mitigating risks, as well as from brokers positioned to outpace decelerating organic revenue growth tailwinds.

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Hannover Re suggests that the market environment for the renewals proved to be more stable than in the previous year. At the same time, demand for reinsurance capacity, which was limited primarily to covers from existing market players, grew.

Jean-Jacques Henchoz, Chief Executive Officer of Hannover Re, said,”We are satisfied with the outcome of the renewals. Against the backdrop of the loss experience in 2023, continuing high levels of inflation and geopolitical uncertainties, we were able to secure further necessary rate improvements in many lines and regions.”

“Building on the previous year’s sustained improvement in the quality of our book of business, we are thus well placed to tackle future challenges.”

Treaties with a premium volume of €9,552 million were up for renewal on 1 January 2024. This corresponds to 62% of business in traditional property and casualty reinsurance (excluding facultative reinsurance, ILS business and structured reinsurance).

Hannover Re renewed a premium volume of €8,671 million, while treaties worth €881 million were either cancelled or renewed in modified form.

Including increases of €1,541 million from new treaties and from changes in prices and treaty shares, the total renewed premium volume grew by 6.9% to €10,212 million.

As in the previous year, Hannover Re grew its book of non-proportional reinsurance more strongly in the renewals.

The premium volume here rose by 10.6% to €3,178 million, with a risk-adjusted price increase of 4.4%. Proportional reinsurance grew by 5.3% to €7,034 million. The price increase after risk adjustment came to 1.3%.

“Demand for our high-quality reinsurance protection was again very strong,” said Sven Althoff, the member of Hannover Re’s Executive Board responsible for property and casualty reinsurance.

“This enabled us to generate further profitable growth in our diversified portfolio, especially on the non-proportional side. At the same time, attractive growth opportunities opened up in structured reinsurance and in the area of insurance-linked securities. All in all, we further improved the quality of our book of business,” Althoff said.

In the region Europe, Middle East and Africa the premium volume booked by Hannover Re rose 6.5%, despite a year of heavy losses in the region.

The premium volume generated by Hannover Re in the renewals in the Americas region grew by 2.2%. Though further large parts of the business in this region are not renegotiated until the 1 June and 1 July renewals.

In the Asia-Pacific region, Hannover Re reduced its premium volume by 10.1%. Asia-Pacific markets were stable, particularly in Southeast Asia, Korea and the “Greater China” region, the main round of renewals took place on 1 January.

Meanwhile, in the natural catastrophe business, the premium volume booked by Hannover Re recorded high single-digit percentage growth in the renewals as at 1 January 2024.

Following the above-average rate increases in the previous year, significantly higher prices and improvements in coverage structures were again obtained in this round of renewals, especially for loss-impacted programmes.

Based on preliminary, unaudited financial figures, Hannover Re reported an operating result for P&C reinsurance for full year 2023 of €1.10 billion, compared with €0.87 billion a year earlier.

It reached an operating result (EBIT) of €1.97 billion in the financial year 2023, compared to €1.52 billion a year earlier.

Group net income increased to €1.8 billion and Hannover Re thus achieved its annual profit target of at least €1.7 billion. Reinsurance revenue rose to €24.4 billion from €24.1 billion.

“The significantly improved profitability of our reinsurance business assures our resilience in a volatile environment,” Henchoz said.

“I am therefore convinced that we shall achieve our goals for the 2024 financial year.”

Hannover Re will publish its audited annual financial statement on 18 March 2024.

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The financing closed on January 10 and marks the official launch of its private credit and lending solutions platform Phoenix stated.

It also provides for the capitalization of Gryphon Holdings’ balance-sheet and finances the future growth of its reinsurance program.

The transaction features a combination of a delayed draw senior facility represented by a contingent capital note, and the issuance of preference shares, with terms that will allow Phoenix and related parties to provide additional growth financing over the course of the next several months.

Art Mbanefo, Phoenix Founder, CEO and CIO, said: “We see significant unmet financing needs among unsponsored businesses in the middle market and believe our creativity, prudent approach to structure and focus on process uniquely position us to identify and execute on that differentiated opportunity set.

“We are excited to launch this part of our platform through our relationship with Gryphon, which provides testament to our ability to pivot and offer bespoke financing solutions that match company and industry dynamics.”

Gryphon Holdings will have a strategy focused on provision of non-catastrophe quota share property and casualty (P&C) reinsurance services.

Clifford Chance LLP and Sidley Austin LLP served as legal counsel for Phoenix on the transaction, while Houlihan Lokey will act as financial advisor on the next stages of the deal.

“Art and the team at Phoenix have established well-deserved reputations as creative capital providers at a number of companies and across multiple geographies, this is not the first time we see them bring new innovations to the insurance market,” said Arik Rashkes, Managing Director and Co-Head of Houlihan Lokey’s Financial Services Group.

He added: “We believe that this could be the first of many innovative financings by the Phoenix Merchant Partners platform that can help redefine how companies approach financing alternatives.”

Phoenix’s latest announcements include the hiring of industry veteran Julia Henderson, as Managing Director, Insurance Solutions, effective February 1.

The executive brings to her new role significant reinsurance and insurance-linked securities (ILS) industry experience.

Henderson’s most recent position was at Vesttoo, where she worked as Chief Commercial Officer.

Prior to that, she was President and Head of Portfolio Management at Stable Corporation, a technology company that provides an index-based platform for commodity hedging and utilises collateralized reinsurance techniques to bring in some of its capacity, where she remains on the board of directors.

Phoenix has also hired Adrian Macedo, who joins the company as Managing Director and Head of Investments, from his most recent role at ORIX USA.

The firm has also added Benjamin Weston to its Advisory Board. He recently served as Global Head of Alternative Investments and Chief Investment Officer of the Alternatives Investments Department at Abu Dhabi Investment Authority (ADIA).

Commenting on the appointments Mbanefo said: “Our people will always be our greatest asset, and the addition of these incredibly talented and highly-regarded professionals provide further testament to the opportunity we see for our platform.

“In founding Phoenix, I set out to build a truly institutional business, and we have established an exceptional foundation of insight and experience from which to grow. We look forward to continuing to strategically expand our team and advisory board as we work with high quality companies and investment partners.”

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According to Aon Catastrophe Insight data, 2022 was the fifth most costly year for global insured losses from nat cat events, behind 2017, 2011, 2021 and 2005.

Aon states that the estimated total of $142bn in 2022 was dominated by Hurricane Ian, which was included at $52.5bn. Further, the year also featured an unusual amount of volatility in the capital markets, while geopolitical risk and fears of recession drove poor stock market performance.

Despite this backdrop of volatility, the ARA reported that P&C gross premiums written (GPW) rose by 9% to $272bn in 2022, split insurance $135bn (+11%) and reinsurance $137bn (+7%).

Meanwhile, P&C net premiums earned (NPE) rose by 11% to $212bn and underwriting profit of $8bn represented a marginally improved net combined ratio of 96.2%.

Aon suggests that, “Underwriting results were generally resilient, reflecting the benefit of compounding rate increases and lower exposure to NatCat event frequency.”

However, total investment returns in 2022 were badly affected by the decline in asset values.

The total investment return reported in pre-tax results fell by 61% to $12.3bn, representing a yield of only 1.5%, driven by $11.1bn of unrealised losses. This led to a net income fall of 56% to $9.6bn, representing a return on equity of 5.2%.

Including a further $37bn of unrealised losses reported outside headline earnings, the total comprehensive loss was $31.8bn, representing a return on equity of minus 14.7%.

Aon notes that on a like-for-like basis, the ARA’s total capital declined by 16% to $214 billion in 2022.

Sherif Zakhary, CEO of Aon’s Strategy and Technology Group (STG), said, “While capital is a complex issue and businesses are not affected equally, it is more about how you tell your risk/reward story and your access to capital focusing on delivering a stable outlook rather than on an episodic one which is dictated by whatever cycle we’re currently in.”

As for the outlook this year, Aon writes, “The six-year period from 2017 to 2022 was challenging for earnings. Over this timeframe, the ARA reported an average net combined ratio of 100.3% and an average return on equity of 5.9%, which was only around two-thirds of the average cost of equity.

“Investors, and in some cases rating agencies, are demanding improved results and this is a major driver of current underwriting discipline.

“Renewals so far in 2023 appear to be delivering on the expectation of better future returns, with higher interest rates also offering a potential tailwind.”

Aon anticipates depleted shareholders’ equity to be restored over time, via higher retained earnings and the ‘pull-to-par’ effect of bonds approaching maturity.

The firm continues, “In the meantime, capital adequacy generally remains strong under risk-based regulatory and rating agency capital models. Recent inflows of new capital have been modest, but may increase as earnings delivery is confirmed.

“As always, the main downside risks are extreme loss activity and unexpected macroeconomic volatility. Geopolitical developments are being closely monitored and reserve adequacy may be threatened by any broadening need to revise long-term inflation assumptions.

“Aon will continue to closely monitor the financial performance of the reinsurance sector. However, the introduction of IFRS 17 from 2023 is likely to present considerable challenges in producing global peer studies like the ARA, given that the new regime diverges significantly from U.S. GAAP.”

The 19 companies included in the ARA are Arch, AXIS, Beazley, Everest Re, Fairfax, Hannover Re, Hiscox, Lancashire, Mapfre, Markel, Munich Re, PartnerRe, QBE, Qatar Insurance, RenRe, SCOR, Swiss Re, SiriusPoint and W.R. Berkley.

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The rating agency’s data was compiled from companies whose 2022 annual statutory statements were received as of March 9^th, which account for an estimated 96% of total industry net premiums written and 95% of policyholder surplus.

The group showed a substantial weakening of underwriting profitability over the year, with personal lines losses and the impact of Hurricane Ian causing its collective combined ratio to deteriorate to 102.7%.

AM Best also noted that an 8.4% growth in net earned premiums and a 21.4% decline in policyholder dividend were countered by a 13.9% increase in incurred losses and loss adjustment expenses (LAE) and a 6.2% rise in other underwriting expenses.

The personal lines segment, specifically the auto lines of business, were considered to be primarily responsible for the decline in underwriting results.

AM Best estimates that catastrophe losses accounted for 6.9 points on the 2022 combined ratio, down from an estimated 7.7 points in the prior year.

Excluding $3.8 billion of favourable reserve development during the year (down from $5.7 billion of favorable reserve development and the lowest amount of reserve releases in the last five years), the industry’s accident year combined ratio was 103.2.

Analysts further noted that the decline in pre-tax operating income was held to 15.3% as a $10.8 billion distribution of cash and Treasury bills received by Columbia Insurance Company boosted the industry’s net investment income by 27.6%.

With tax expense down 35.2% and realized capital gains down 83.2%, the industry’s net income slid 31.3% to $42.0 billion.

Additional points showed that P&C industry surplus declined 6.7% from the end of 2021, to $951.9 billion, as $67.1 billion of net income, contributed capital, and other surplus gains was reduced by $35.3 billion of stockholder dividends and a combined $136.6 billion change in unrealized losses at National Indemnity Company, Columbia Insurance Company, and State Farm Mutual.

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Swiss Re expects headline inflation to decline but stay elevated in 2023, to some extent alleviating upward pressure on claims compared to 2022.

However, it adds that cost inflation in certain prices, such as labour and healthcare, may remain high, with motor and liability also set for continued pressure as additional factors like social inflation and more frequent traffic accidents underpin claims.

“This environment will require P&C insurers to consider continuing underwriting discipline in 2023,” Swiss Re concluded in a new report on the claims environment.

Analysts note that high inflation has already proved expensive for P&C insurer, and estimates that inflation alone will increase P&C claims costs by between 5% and 7.5% across the main five markets in 2022 and 2023.

And for property, which as a short-tail business immediately sensitive to inflation impacts and rising construction costs, Swiss Re estimates a 6% to 13% increase over the two years, which is higher than the 5% to 8% range of registered price increases.

“We expect P&C claims growth to ease in 2023 alongside moderation in inflation,” analysts wrote. “Coupled with a repricing in loss-making areas during recent primary market renewals, this may alleviate some of last year’s underwriting pressure.”

They continued: “Still, insurers will need to maintain discipline in pricing, and terms and conditions, as we forecast inflation to continue to impact many claims-relevant price categories, such as labour and medical costs. Prices in these areas typically grow more slowly than in other segments, and they remain elevated.”

Swiss Re estimates that the average combined ratio in P&C insurance rose to 99.3% in 2022 from 96% in 2021, driven mostly by inflation, and forecasts a combined ratio of around 98% for the sector in 2023, which would be close to the pre-COVID 2019 level of 97.7%.

Looking at notable factors for the coming year, it’s expected that cost increases in construction, which peaked in 2022, should ease but will remain high by historical standards, as building activity is still strong and China’s re-opening will increase global demand for commodities.

Likewise, Swiss Re suggests that cost rises in motor vehicle repairs and replacements should ease in key markets, but will still be above pre-pandemic levels.

And regarding other inflation drivers, it expects tight labour markets to increase wages and backlogs of medical procedures to increase healthcare costs, putting pressure on long-tail lines of business in casualty and motor liability.

“Signals for a market correction had been mounting long before the inflation-driven rise in claims 2022,” Swiss Re concluded. “The underlying claims drivers indicate that higher primary insurance rates are likely. Sustained insurance underwriting discipline will be needed in 2023 to help improve underwriting results.”

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In its report, Lockton explains that the P&C insurance market was previously on a path toward stabilisation before the event of Hurricane Ian, which ravaged Florida and other parts of the Southeastern US.

Hurricane Ian will ultimately cost the insurance industry an estimated $50-$65 billion, making it one of the largest disasters in US history.

Moreover, the 2022 Atlantic hurricane season overall was the third-most expensive season on record, according to Munich Re, resulting in $110 billion in total losses.

This has created a potential imbalance between supply and demand, suggests Lockton’s report, as Cedents are seeking to lay off risk, while reinsurers are hyper-focused on returns, as these have suffered amid the increasing frequency and severity of catastrophic property losses over the last decade.

Ian also exacerbated some of the adverse existing market conditions, suggests Lockton, setting the stage for difficult January treaty renewals.

The report states that not only is capacity expected to decline from 2022, but it will also be deployed differently, with some carriers finding it difficult to secure capacity at an expiring structure, with prices expected to increase sharply.

The firm adds that even before Ian, there was widespread agreement that reinsurance pricing had not kept pace with rising loss trends. Now, pricing is expected to rise steeply, and will ultimately be passed along to retail clients.

Though despite uncertainty about the reinsurance market, core P&C insurers continue to report both profitability and growth, says Lockton.

According to the firm, insurers generally reported healthy combined ratios as well as increases in net written premiums over 2021.

However, still accumulating property catastrophe and auto losses are worrying the industry, contributing to a $24.3 billion underwriting loss for the P&C industry for the first nine months of 2022, according to AM Best.

Lockton suggests that insurers with the greatest exposure to personal lines and property saw the most significant impacts. Meanwhile, the industry surplus also fell 11% from the end of 2021 to $919.6 billion.

The report states that although the industry remains well-capitalised, unrealised losses among some insurers are adversely affecting net income and contributed capital. Rising interest rates, however, are lifting carrier yields tied to new money and rollover investments.

Lockton writes, “At the end of 2022, property remains the major story in a market that is otherwise predictable for buyers.

“Conditions across many major lines, including directors and officers liability, cyber and umbrella/excess liability are better and more competitive than they have been in recent years. Workers’ compensation also remains favourable to buyers and countercyclical to the broader market.”

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Aldagi expects that with this expansion, the firm will emerge as an important regional player, allowing it to better meet the needs of both local and regional insurers by reinsuring risks and capitalising on existing opportunities.

The firm states that it has been investing in the development of a highly qualified reinsurance team and market research arm over the last two quarters. As a result, Aldagi is already serving its first reinsurance clients from the region.

The company suggests that it intends to underwrite inwards reinsurance for all non-life insurance products, utilising the full potential of both Georgia and the surrounding region.

Giorgi Baratashvili, Chief Executive Officer of Aldagi commented, “In light of the sharp decline in the global reinsurance market and a steep rise in reinsurance rates, the regional market players are struggling to find stable reinsurance partners.

“With its continued solid financial performance, Aldagi is best positioned to enter the reinsurance market and become a reliable partner for both Georgian and regional players.”

Aldagi, which was launched in 1990, is a wholly owned subsidiary of Georgia Capital, a diversified investment holding company listed on the premium segment of the London Stock Exchange.

The firm has established international corporate governance practices, which are fully in line with the international standards. Additionally, it has been audited for more than 15 years by Ernst & Young.

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