Reinsurance Rates Decline Amid Rising Competition and Ample Capacity

Reinsurance pricing continued its downward trend during the June and July 2025 renewals, confirming Fitch Ratings' forecast that market competition and abundant capacity would pressure rates following their 2024 peak. According to Fitch, loss-free property program rates dropped between 10 percent and 15 percent, while US casualty pricing remained flat and retrocession coverage improved.

Sector profitability remains positive but off-peak, with underwriting margins tightening under the strain of lower prices, increased claims severity—particularly from events such as the Los Angeles wildfires—and slightly looser terms and conditions in property reinsurance. Despite margin compression, Fitch said pricing remains above historical averages and overall fundamentals continue to support strong sector performance.

"The full financial impact of the lower pricing since mid-2024 is now becoming evident, with overall underwriting margins slipping due to lower margins on new business," Fitch said. Investment income continues to provide partial offset, and strong reserve adequacy allows reinsurers to leverage favorable reserve developments to manage earnings. However, social inflation may contribute to adverse reserve development in certain liability lines.

Competition is increasingly centered on pricing rather than terms, Fitch said, with reinsurers now showing more willingness to write protection at lower attachment points and for more frequent return periods. Working-layer and aggregate reinsurance products are returning, and cedants are gaining more leverage in negotiations, especially in property lines. Casualty remains more balanced, with mixed appetites among reinsurers to write US cover.

Although price pressure is intensifying, Fitch noted that property reinsurance revenues are supported by greater risk awareness among cedants and rising insured values. Specialty lines are evolving at different paces: Cyber rates continue to decline, while aviation remains stable.