Fitch Update on Reinsurance Market Conditions

According to a recent report, Fitch said underwriting margins of rated reinsurers globally are expected to peak in 2024. In contrast to 2023, in this year's January renewals, only loss-affected lines of business and regions witnessed significant price increases. Furthermore, market conditions are expected to start to soften in 2025, as a rising risk appetite and strong returns will increasingly attract additional capital from traditional reinsurers and institutional investors.

Modest price increases at January renewals broadly followed claims inflation patterns, amounting to rises of 5–10 percent in most lines of business. Those lines affected by the geopolitical conflict in Russia and Ukraine, and Gaza, attracted the most attention and were the most complex to handle. In casualty, reinsurers did not succeed in pushing through more significant price increases following under-reserving for older underwriting years and concerns of social inflation. Cyber was the only line to have a significant price decline on higher supply.

The stabilization of financial markets and major reinsurers' move to the accounting standard IFRS17 led to a strong recovery in reinsurance capital in 2023. Fitch said reinsurer capital grew by 11 percent, to around $535 billion, by the end of 2023, partially reversing 2022 losses. Fitch said alternative capital grew by 13 percent in 2023 to around $105 billion due to a record issuance of catastrophe bonds. Strong inflows occurred due to very attractive returns for cat bond investors in 2023, thanks to the absence of large loss events, strong pricing, and a high investment return on collateral pools. Fitch concluded that the rise in available capital should support increasing reinsurance capacity in 2024.