Reinsurer underwriting margins expected to peak this year: Fitch
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Underwriting margins of the global reinsurers tracked by Fitch Ratings Inc. are expected to peak this year, driven by strong new business margins and tighter terms and conditions.
Conditions are forecast to soften in 2025 as the strong expected returns attract increasing competition and capital from both traditional reinsurers and alternative capital providers, pushing the supply and demand balance back in favor of cedents, according to a report released Tuesday by the ratings agency.
Investment yields will also help to bolster reinsurers’ earnings this year, according to Fitch.
“Total investment income should remain very supportive of earnings for the global reinsurance sector in 2024,” the report said.
Total reinsurance capital is expected to have grown by 11% to approximately $535 billion at the end of 2023, with Fitch estimating alternative capital to have grown by 13% in 2023 to around $105 billion due to record issuance of catastrophe bonds during the year.
Reinsurers achieved only modest gains during this year’s renewal process, Fitch said.
Property market prices increased by 5% to 10% for loss-free programs in most jurisdictions at Jan. 1 renewals, keeping pace with claims inflation. Only loss-affected lines of business and regions saw significant price increases, according to the report.
Casualty lines displayed a stable pricing environment despite concerns about social inflation.
“All in all, reinsurers defended, but did not improve, their new business margins and the quality of their book of business in 2024 compared to 2023,” Fitch said.
