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Returns in the reinsurance market are still strong despite softening at recent renewals and this is driving some reinsurers to seek out growth while the opportunity remains, which analysts at J.P. Morgan call a rational view.

Traditional reinsurance firms have been building their reserve buffers through the hard market for just such an eventuality, a recent analyst report from J.P. Morgan implies.

The reserve buffers, that major reinsurance firms build through years where loss experience is relatively normal or benign, can be wielded to their advantage as margin compression begins during a softening phase of the market cycle.

The J.P. Morgan analysts acknowledge that, with the reinsurance cycle, it looks largely different since 2023.

But they provide caution which may also raise memories of the past for some, saying, “A prolonged period of strong earnings in the space is likely to mean that there could be a period of downward pressure on pricing as the reinsurers know at normal levels of loss that margins still feel very attractive.”

When the reinsurance cycle softened through the 2010’s, as it happened there was a lot of commentary on the growth of alternative capital and insurance-linked securities (ILS) as being the main driver.

But, the reality was that some of the largest reinsurance companies in the world were leveraging their reserve buffers and other financial levers to bulk up on property catastrophe risk, especially across the United States, reporting significant growth in some cases through the early 2010’s and accentuating the softening environment.

At that time, for traditional reinsurers who were well-prepared, growth was also a rational view, as returns remained elevated historically and they had built up their buffers that enabled them some room to grow, while rates softened off.

The latest J.P. Morgan analyst report paints a similar picture of this environment, one where traditional reinsurers have the firepower, leverage and appetite to keep growing, but after the peak of pricing.

The reason perhaps being, that it takes a few years of particularly strong returns to really build the buffers and appetite to grow into a market that has already begun to soften.

The J.P. Morgan analyst team also highlight the clear-risk that returns get competed away in the reinsurance space.

“We don’t buy into the thesis that the reinsurance cycle will be more stable forever; cycles exist as attractive returns get competed away over time, but we do think that there is some credibility to the argument that returns are likely to stay at high levels for the next 2-3 years given the buffers built into guidance and balance sheets in the recent challenging market,” they explain.

It was that “competing away” of reinsurance returns that resulted in the super-soft market environment we saw in the mid-2010’s that persisted all the way up to the 2017 hurricane season, when it turned out memories had perhaps proven to be too short, once again.

The analysts believe that 2025 can be the third year in a row when reinsurance returns are strong for the major players in the space, even accounting for the wildfires and a coming hurricane season.

In fact, while beginning to dip, the J.P. Morgan analysts feel reinsurer returns could stay strong into 2026.

“The fact that the European reinsurers have been able to sustain guidance for 2025 despite a tough beginning to the year demonstrates to us that profitability in the system is strong and that returns are locked in at similar levels to the ones seen recently,” they state.

Still, new inflows into reinsurance remain relatively small and concentrated in the catastrophe bond and insurance-linked securities (ILS) space, in the main.

But, incremental capital could still pressure rates, as traditional reinsurers unlock their built-in leverage to deploy more capacity.

The analysts said, “While anecdotal, we have seen some elements of the market being more willing to deploy capital into reinsurance. We see this as a sign that the reinsurers have tested out improved terms and conditions and retentions along with stronger pricing, and seen that it produces strong results.

“Balance sheets are strong even taking into account the latest market movements and with returns looking like they are at some of the best levels seen in years, we see the growth as a rational view for some reinsurers to take with global property catastrophe prices only just below the 2023 levels when there was a huge amount of excitement in the market.”

At this stage, it does feel like the market may be heading in a similar direction to the early 2010’s and that absent major loss activity, another cause of capital erosion, or something that stimulates a rise in the global cost-of-capital, it’s hard to see anything but more softness ahead.

As reinsurers pull on growth levers to capitalise on market conditions, they would be wise to remember that growth capital to support their ambitions comes in many forms.

We are seeing increasing use of alternative capital, from catastrophe bonds through sidecars, some of which is growth ambitions driven capital acquisition and used wisely another form of leverage that fuels expansion.

But, it must be remembered that, institutional investor memories are not typically considered short and we’re already speaking with ILS allocators that express some concern over recent rate trajectory.

While returns are still deemed attractive in reinsurance, by both reinsurers and third-party capital investors, there is a limit and costs-of-capital need to be met.

With costs-of-capital rising globally on the back of the financial market volatility we are currently seeing, reinsurers and ILS managers would do well to remember that there will be a point at which investor appetite wanes. So it’s important, for those using or managing this capital, to continue delivering a sustainable return commensurate with the risks being taken on.

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While the mid-year reinsurance renewals are forecast to see further softening of between 5% and 10% as a base case, according to analysts at Evercore ISI, the team there asks whether subrogation potential for the January California wildfires could make the renewals even more competitive?

Reinsurance renewals so far in 2025 have seen pressure on pricing, with rates-on-line declining in general as the well-capitalised industry demonstrates its ambition to continue deploying capacity to grow portfolios while pricing remains at still historically elevated levels.

But commentary has been suggesting that the key mid-year reinsurance renewals, at June and July 1st, when much of the Florida property catastrophe reinsurance and US treaties are renewed, could see reduce rate pressure because of the significant losses flowing through the reinsurance market from this year’s Los Angeles wildfire event.

With those wildfires still estimated to have caused an insurance industry loss of anywhere between $35 billion and $50 billion, it has been expected that they would have some effect on renewals for US programs and reinsurer appetites.

Aon noted this week that as much as between $11 billion and $17 billion of the wildfire losses is expected to be ceded to reinsurance capital providers, as a result of which 25 percent to 33 percent of major reinsurers’ annual catastrophe allowances may have been absorbed by the fires.

However, Gallagher Re said that reinsurance capacity has been ample to support US nationwide renewals at April 1st, with price reductions seen and some more aggregate limit being deployed as well.

So, while the wildfires have been impactful they don’t seem to be changing the trajectory of reinsurance pricing, but could be preventing softening happening faster.

We were told by sources that US property catastrophe reinsurance renewals for April 1st saw more differentiation dependent on loss experience and with the recent California wildfires being factored in to decision-making.

It does seem though that the wildfire losses may not be having sufficient effect to outweigh the influence of the weight of capital in the reinsurance market, which might suggest that the Evercore ISI analysts base case of -5% to -10% at the mid-year renewals is a decent forecast.

However, while not part of the base case, the Evercore ISI analyst team highlight another important factor to consider, the potential for subrogation claims and recoveries to be made after the wildfires.

As we reported back in January, the topic of potential recoveries from subrogation of claims was raised in relation to the Eaton fire, with electrical utility Southern California Edison in focus as questions arose over whether its equipment may have caused any of the blazes.

While legal action has been started, so far there hasn’t been any official determination of liability related to the Eaton fire.

But, the Evercore ISI analyst team rightly point out that the Eaton wildfire is expected to make up around one-third of the industry loss from the wildfires, on which basis it could be somewhere between $11 billion and close to $17 billion of the total market loss.

With Aon estimating that $11 billion to $17 billion of the total industry loss would be ceded to reinsurance capital providers, should subrogation come into play the ceded figure related to the California wildfires could also be reduced, perhaps meaningfully.

Resulting in a commensurate drop in how much of the traditional reinsurers catastrophe budgets have been eaten up by the wildfires, while also allowing many insurance-linked securities (ILS) funds to free up more of their capital as well, after the flow of subrogation.

All of which could have the effect of leaving the reinsurance and ILS sector even better capitalised in time for the mid-year renewal season, if a determination is made on any liability for the Eaton fire before that date.

The result of which could be reinsurers and ILS funds coming to the mid-year renewals with increased appetites, driving greater competition and perhaps amplified softening of rates.

The Evercore ISI analysts muse, “We wonder if subrogation potential for LA fires will push down insured losses and
result in a more competitive renewal.”

Which is worth watching out for over the coming months. The latest from SoCal Edison is that the electrical utility began a new phase of inspections and testing of electrical equipment in Eaton Canyon on March 17th, which it said could take some weeks and is being done in coordination with fire investigators.

However, the utility also said (in a statement from March 14th), “SCE does not anticipate having an immediate update following the upcoming inspection and testing and continues to expect the full investigation to take several months to complete.”

Which suggests that the reinsurance industry may not know whether subrogation claims are going to be warranted, let alone rewarded, by the time of the mid-year renewals.

Could wildfire subrogation drive more competitive mid-year renewal? Evercore ISI asks was published by: www.Artemis.bm
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Reinsurance sidecars have continued to gain in popularity and brokers have commented today on the expansion of this third-party investor supported segment of the insurance-linked securities (ILS) market, seeing it as one area driving robust capital growth into 2025.

Previously, Aon Securities estimated that the outstanding market for collateralized reinsurance sidecar structures had reached a new record high of $10 billion in a report from September 2024, which that broker’s capital markets unit said represented roughly 40% growth on the prior year.

While, AM Best and Guy Carpenter put the reinsurance sidecar market at between $6 billion and $8 billion, as of the middle of 2024.

Then, after the January renewals this year, Gallagher Re said that reinsurers within the EMEA regions had been offering more capacity, in part empowered with ILS-fueled new sidecar capacity.

Now, in commentary published in April reinsurance market reports, both Gallagher and Aon have again highlighted the collateralized reinsurance sidecar as an area of continued expansion, within third-party or alternative forms of ILS capital.

Gallagher Securities, the capital markets and ILS arm of Gallagher Re, said that, “Sidecars have continually gained in popularity, with Gallagher Securities observing nearly a roughly 50% increase in issuance YOY.”

This broker said, “Cedants are increasingly forming partnerships with investors through sidecars and related vehicles, driven by investor demand for access to premium flows from insurance risks.”

Adding that, “This interest is now extending beyond traditional property catastrophe risks to include casualty and other non-cat ILS risks and using innovative structures, signaling a strong future for the sidecar market.”

Aon’s Reinsurance Solutions and its Aon Securities arm also commented on the continued high-levels of activity in the reinsurance sidecar space in its new market report.

Aon also explained that new inflows to sidecar structures are seen as one of the key drivers for alternative reinsurance capital growth, alongside catastrophe bonds.

As we reported, Aon sees alternative or ILS capital in reinsurance as having reached $115 billion by the end of 2024, a figure that has likely grown with the robust catastrophe bond issuance seen in Q1 2025.

Aon said, “In addition to the robust growth of the catastrophe bond market, the broader ILS market has seen further growth in sidecar capital, pushing alternative capital to nearly $115 billion.

“Increased investor appetite has allowed many traditional reinsurers to expand their sidecar and/or catastrophe bond programs, enabling the deployment of additional capacity.”

This broker continued to explain that, “Sidecar capacity has also grown, in line with what we’ve seen over the prior two years. New entrants to this market—many of whom are well-regarded underwriters—have developed new platforms, creating exciting opportunities for investors. Further, existing sidecar offerings (e.g., Everest’s Mt. Logan) continued to expand from reinvigorated marketing efforts and strong returns over the past two years.

“The sidecar market has also grown beyond natural catastrophe risk to long-tail casualty opportunities, generating interest from new types of asset managers looking to manage more long-term capital.”

However, Aon also noted that the January 2025 California wildfires will cause losses for many reinsurance sidecar structures.

Saying, “The sidecar market, on the other hand, will be impacted by the wildfires, given that these contracts are typically structured as a pro-rata share of non-proportional reinsurance portfolios.

“While it’s too early to tell how the wildfires will impact the overall returns of the property sidecar market, it’s reasonable to assume a negative return during the first quarter of 2025.”

Find details of numerous reinsurance sidecar investments and transactions in our directory of collateralized reinsurance sidecars transactions.

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Aon’s Reinsurance Solutions division forecasts increased demand for property catastrophe reinsurance protection in the United States at the key mid-year renewal season, with additional limit of as much as $7.5 billion expected to be sought out by cedants, much of which will be for risks in Florida.

However, the broker also expects the mid-year renewals will see “pent-up supply still outstripping demand”, from the very-well capitalised reinsurance and insurance-linked securities (ILS) markets.

Commenting on the April 1st renewals just completed Aon said, “A competitive reinsurance market resulted in improved pricing for most insurers at April 1 renewals, driven by enhanced reinsurer results and relatively benign natural catastrophe loss activity across the region.”

Adding that, “These buyer-friendly conditions are expected to continue through the mid-year reinsurance renewals, supported by robust levels of capacity and reinsurer appetite.”

Global reinsurance capital reached a record high of $715 billion in 2024, Aon said, helped by expansion of the catastrophe bond market and alternative capital rising to a new high of $115 billion.

George Attard, CEO APAC for Reinsurance Solutions at Aon, commented, “At April 1 our clients continued to benefit from favorable reinsurance market and pricing conditions, supported by Aon’s extensive advocacy, analytical and transactional expertise.

“We expect to see opportunities for insurers to explore frequency protections and top-up covers as we approach the mid-year renewals, especially for those insurers that concentrate on the key characteristics of high performance.”

Attard added, “Across the board, facultative capacity has increased and reinsurers are competing more aggressively, creating greater opportunities for insurers to use facultative reinsurance to support growth plans and manage volatility.’

Attard further commented on the outlook for the mid-year reinsurance renewals at June and July, when much of the US business and a particular Florida focus, as well as treaties in Australia and New Zealand are always key features of the negotiations.

“Heading into the mid-year renewals, we expect over $7.5 billion of additional U.S. property catastrophe limit demand, mostly due to a healthier Florida market and the depopulation of the state windstorm insurer Citizens,” Attard explained.

Further stating that, “We also anticipate some additional reinsurance purchasing from U.S. national carriers looking to mitigate further major net losses during 2025.”

Aon’s Reinsurance Solutions said that it expects demand for property cat reinsurance limit in Florida to rise by between $4 billion and as much as $5 billion at the June 2025 renewals.

An expected increase in the Florida Hurricane Catastrophe Fund (FHCF) attachment (by around $1.4 billion), is anticipated to drive additional buying below the FHCF, while some vendor model changes will also support increased demand for reinsurance and so will Citizens depopulation as more risk moves to private insurers.

Aon notes that reinsurance capital continues to grow and is expected to keep up with demand, so no shortage of capacity is expected for the mid-year renewal season.

However, the company also explained that after the significant California wildfire losses earlier this year, with as much as between $11 billion and $17 billion being ceded, “These losses have absorbed 25 percent to 33 percent of major reinsurers’ annual catastrophe allowances which may affect how some come to the market at mid-year.”

The reinsurance broker added that, on the client side, “For insurers, current market dynamics are creating opportunities to explore frequency protections and top-up covers in an increasingly favorable pricing environment. Some clients are taking advantage of favorable market conditions and securing capacity at attractive rates ahead of mid-year renewals.”

Which is a trend seen in the catastrophe bond market, with more US limit placed in the first-quarter of the year and a number of sponsors coming to market earlier than typical.

Early signings are likely to remain a feature in the run-up to the June and July reinsurance renewal season, on which Aon said, “Opportunity exists to pursue off-cycle additional protection from reinsurers looking to deploy capital not taken up during January renewals. In addition, reinsurers will be keen to write premium to earn back losses accrued in the first quarter.”

Given the additional limit set to be demanded for reinsurance renewals at the mid-year, this presents opportunities for the insurance-linked securities (ILS) market.

Catastrophe bonds can be expected to absorb a proportion of this, as too while private ILS strategies focused on collateralized reinsurance.

With Florida in focus for the highest increase in property cat limit demand in 2025, that being ground-zero for the deployment of ILS capacity it is to be expected the market takes its share.

However, it’s always worth remembering that an incremental $7.5 billion of limit being required will not equal that sum in additional capital being deployed, given the leverage of the rate balance-sheet and levered ILS strategies.

Read all of our reinsurance renewals news and analysis.

US property cat demand to rise ~$7.5bn at mid-year renewals, Florida taking up to $5bn: Aon was published by: www.Artemis.bm
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While the April 1st reinsurance renewal is a smaller affair for property catastrophe accounts in the United States, broker Gallagher Re reports a wide-range of pricing outcomes, dependent on loss experience, with risk-adjusted rates on-line falling as much as 15% for loss free accounts, or rising as much as 15% for catastrophe loss hit.

“In a relatively light renewal period, nationwide account dynamics were broadly a continuation of the themes witnessed at the 1.1.2025 renewals,” Gallagher Re explained.

Adding that, “Reinsurers were highly focused on the impact of the January Californian wildfires, with buyers focused on differentiating both approach to the peril / geography and the outcomes from the event(s).”

However, impacted renewals were small in number and outcomes at the April reinsurance renewal for US cedants were highly dependent on loss experience and also program size.

Catastrophe loss free accounts property catastrophe reinsurance rates on-line came in with -5% to -15% reductions, on a risk-adjusted basis, Gallagher Re reports.

But, catastrophe loss hit US accounts saw property cat rates ranging from flat to +15%.

Risk loss free property reinsurance treaties renewed from flat to -5%, while risk loss hit property renewals saw rates-on-line ranging from +5% to as much as +20%, Gallagher Re said.

Which drives home the wide-range of outcomes and the influence of losses on property and property catastrophe reinsurance appetites and pricing at this time.

Despite the wildfires in January, Gallagher Re noted that capacity for US property catastrophe risks remained ample at the April 1st 2025 renewals.

Buyers took advantage of the increased capital supply to hold their retention levels constant, and push price reductions at the top end of their towers, typically the most competitive layers.

Due to increased capacity for property risks, Gallagher Re said there was increased demand for aggregate covers at the renewals with more placements seen as well.

“Several carriers sought to bolster existing aggregate programs, while others looked to establish new programs. That said, these aggregate protections continued to be pitched at the capital preservation, not earnings protection level,” Gallagher Re explained.

Read all of our reinsurance renewals news and analysis.

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Howden Re has reported that risk-adjusted catastrophe excess-of-loss (XoL) reinsurance rates-on-line for Japan saw reductions of 10-15% at the April 1st 2025 reinsurance renewals, as pricing “eased from a high base” and sellers sought to protect or grow positions at the renewal amidst higher competition and greater supply.

Risk-adjusted rate reductions in Asia-Pacific (APAC), combined with varied specialty renewal outcomes, reflects “hard market softening” at the Japan-focused April renewals, according to the reinsurance broker’s latest analysis.

With many property catastrophe reinsurance treaties having experienced relatively loss free outcomes for the last contract year, a continuation of January’s softening trend had been largely anticipated for the April renewals, as we reported.

“There were 10-15% risk-adjusted reductions on catastrophe excess-of-loss programmes, whilst global specialty and direct and facultative reinsurance placements varied by class,” the broker added.

The broker also revealed that both Japanese wind and earthquake XoL pricing adjusted from a high base at the April renewals, following consecutive years of market-driven and post-loss hardening, which began in 2018 and 2019 following the impacts of typhoons Jebi, Hagibis, Trami, and Faxai.

You can see Howden Re’s updated rate-on-line index chart for Japanese catastrophe excess-of-loss reinsurance contracts below:

“The natural catastrophe loss landscape in Japan and the Asia-Pacific region in 2024 was subdued relative to previous years, contributing to moderation at renewals,” Howden Re explained.

“The most significant losses of the last 18 months have been the Noto earthquake in January 2024, the Taiwan Hualien earthquake in April and Typhoon Yagi in September.”

Additionally, there had been some debate across the industry surrounding the potential impact of the January 2025 California wildfires on the Japanese April 1 renewals, however, Howden Re notes that the event, while impactful to reinsurer operating performance, did not “meaningfully constrain supply at 1 April.”

Overall, for Japanese catastrophe XoL programmes, less limit was purchased at the lower end of programmes with some buyers of coverage seeking additional top-layer reinsurance limit to address specific risk concerns, Howden Re continued.

The broker also noted, on average, ceding commissions for proportional quake cover increased by approximately two percentage points, signalling improved terms for cedants, as per-risk commissions varied by programme performance.

However, despite rate reductions of up to 15%, Howden Re says that “Japan remains an attractive market for reinsurers due to its high volume, relatively uncorrelated risk and deep pool of underwriting expertise backed by experience and exposure data.”

Andy Souter, Head of Asia Pacific, Howden Re International, commented: “This renewal is, on balance, a welcome reprieve for buyers in Japan and throughout Asia-Pacific on the back of an extended period of significant rate increases. With the recent easing in pricing and stable renewals, it’s a good time for cedents to secure more favourable terms and address specific risk concerns.”

Further in Howden Re’s analysis, the broker highlighted how the price moderation witnessed in most classes of business at the April renewals was facilitated by rising levels of dedicated reinsurance capital and strong insurance-linked securities (ILS) inflows, while also noting that capital levels now exceed their previous peak.

“This increase has been bolstered by record catastrophe bond issuance, which has continued in earnest during the first quarter of this year. Whilst reinsurers have reported healthy earnings and strong book value growth, it is becoming clear that future gains will increasingly depend on strategic innovation, rather than pricing momentum alone,” the broker added.

You can see Howden Re’s estimates for reinsurance and ILS sector capital levels in the chart below, which shows the significant growth seen in recent years:

David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re, commented: “At this stage of the pricing cycle, profitable growth increasingly requires a greater focus on product development, underwriting strategies and capital management.

“In order to navigate this market phase, comprehensive, integrated capabilities spanning treaty, facultative, MGAs, strategic advisory and capital markets, Howden Re is uniquely positioned to support cedents and reinsurers as they navigate this next critical phase of the cycle.”

Howden Re’s April renewal report also revealed mixed outcomes at April 1st for the global specialty reinsurance sector, primarily driven by ongoing uncertainty around war-related losses and macro volatility.

The broker explained that aviation reinsurance risk-adjusted pricing was largely flat at April 1st, showing a slight hardening compared to the 3.5% year-on-year decline seen at the January renewals earlier this year.

Moving over to the marine and energy space, Howden Re states that the downstream losses experienced in 2024 had little impact on programmes at April 1st, although the Baltimore bridge collapse remained in focus, due to the incident taking place within days of last year’s renewal and was therefore largely unaccounted for.

Although wildfire exposures were widely discussed, Howden Re noted that within the marine and energy space, specie was the main focus.

Switching attention over to terror, reinsurance rates reduced further amid softening on the direct side of the market.

“Consistent event definitions continued to provide stability in an otherwise evolving market. New capacity is simultaneously seeking entry through the MGA channel on both the insurance and reinsurance side, as observed in previous renewal cycles,” Howden Re explained.

On the other hand, the direct & facultative (D&F) market “continues to show resilience with strong demand for excess-of-loss capacity despite early 2025 loss activity,” says Howden Re.

The broker explained that reinsurers demonstrated greater pricing discipline at April 1st, compared to January 1st, particularly in response to California wildfire exposures which were largely retained by cedents.

Chris Medlock, Director, Global Specialty Treaty, said: “The April renewal reflected a broad range of outcomes across specialty and D&F lines. Whilst pricing softened in some areas, reinsurers remained selective and disciplined. Capacity was available but placement success depended on structure, exposure and underlying risk quality.”

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The April 1st 2025 reinsurance renewals are said to have seen a continuation of the gradual softening trend experienced at the start of the year, with reinsurance capital providers displaying strong appetites for growth still, but sources suggesting the overall outcome has remained disciplined.

While there have been some double-digit rate decreases seen, particularly in Japan and for higher-layers of towers, the general feeling is one of markets remaining focused on achieving adequate risk-adjusted returns for deploying capital to April renewal opportunities, as pricing comes off cyclical highs.

With many property catastrophe reinsurance treaties having experienced relatively loss free outcomes for the last contract year, a continuation of January’s softening trend had been largely anticipated.

Speaking with brokers and market participants in the last week, the outcome looks set to be one where many treaties have priced down, on a risk-adjusted basis, but that some larger cedants buying bigger reinsurance towers have also been taking the opportunity to leverage their financial strength to manage renewal costs, particularly in Japan.

Sources in the collateralized market and at insurance-linked securities (ILS) funds told us that they have been satisfied with the  April 1st opportunities they have sourced, while also noting a more competitive marketplace and strong appetites from reinsurers that have in some cases made ILS funds be more selective.

As well as reinsurers exhibiting strong appetites for growth at this renewals, which is no surprise given high capital levels and the fact pricing remains robust even with the softening seen, there are also said to have been some additional renewal participants, with some markets returning with a desire to grow into regions that were renewing at April 1.

One of the drivers for that is an impression that some regions renewing at April 1st have experienced strong growth in premium volumes, expanding the available opportunity set. But overall demand for protection across the April renewal has been relatively stable it seems, with additional purchases at some levels in reinsurance towers offset by stronger or larger cedants managing their costs through increased retentions and restructuring of towers.

On a risk-adjusted basis many renewals have come in softer it appears, but this is still only seen as a gradual continuation of recent renewal trends, despite the more competitive marketplace and in some cases growing number of reinsurance panel participants.

Brokers told us that there has been ample capacity to close renewals for April 1st and that their clients, the reinsurance buyers, are largely very satisfied with the favourable outcome.

The broader range of market participants being seen has also included some ILS players who, we’re told, have had some additional capacity to deploy and found opportunities attractive enough to meet their return targets.

Fully-collateralized limit remains less evident at April 1st, compared to other major renewals, given buyers often have a preference for rated paper. There is collateralized ILS deployment into April renewals, but it’s often based on long-term relationships with ILS managers and has never expanded that rapidly.

But, we understand fronted ILS capacity continues to be a participant that is growing in some cases, with some ILS managers said to have have accessed business from new regions and counterparties this year.

Japanese renewals have seen a competitive market environment this year, with softening largely seen, especially for the clients that have been able to demonstrate the best performance, most disciplined growth and where enhanced data granularity has been provided.

As a result, renewals are seen as risk-adjusted down by single digits and close to double-digits, for the majority, or into double-digits for top-performing cedants and larger catastrophe excess-of-loss towers, especially at higher-layers.

Reflecting the discipline still being seen, we’re told that the performance of an underlying treaty has been a key in April renewal outcomes, with markets pushing back on much lower rates in some areas, while reductions have been highest for cedants that can demonstrate their performance and provide enhanced portfolio data to assist reinsurance markets in their pricing.

But, perhaps making the outcome a little less clear, Japan renewals saw some larger buyers opting to manage the costs of their reinsurance purchases by retaining more risk against their backdrop of strong results and robust financials. Some have also been keen to buy more cover higher-up as a result of this trend, we are told.

Another major April 1 renewal market is India, where there were flatter risk-adjusted outcomes for many, but some softening seen, again for the best performing cedants. Here there has also been some demand increase it appears, although this is on the back of strong premium volume growth, we understand.

The Philippine market is thought to have also experienced a softening market for reinsurance at the renewals, although with some greater differentiation seen. Other parts of Asia are said to have experienced similar outcomes.

On the all-important terms and conditions, sources said the majority remain relatively unchanged, aside from adjustments where retentions have been adjusted to account for growth, or financial strength, often at the behest of the cedant itself, another sign of cost management in a still harder reinsurance market price environment.

Rates-on-line remain higher than where they were five years ago, even with the continuation of the January softening trend at April 1st, but we understand markets did push-back on early attempts to push for greater reductions this year, seemingly keen not to see the rate environment return to the levels seen around 2017.

Property catastrophe reinsurance rates-on-line had fallen by 7.2% at January 1st, according to broker Guy Carpenter’s regional indices.

Guy Carpenter’s APAC property catastrophe reinsurance rate-on-line Index was still up by 32% after the January renewals, since the market bottomed out in 2018 for this region.

When this index is updated to incorporate the April 1st outcomes, it seems likely the 2025 figure will fall a little further given the sentiment we’re hearing from the market.

There are some reinsurance renewals in the United States at April 1st and here we’re told that again, the outcome is seen as similar to January, however with more differentiation evident dependent on loss experience and with the recent California wildfires being factored in.

We understand there has been some demand increase in the US, while there has also been a little more retrocession buying and that this has experienced competitive markets as well.

In the coming days we expect to get more colour as broker reports on the April renewals come out, so stay tuned for additional insights.

Read all of our reinsurance renewals news and analysis.

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Equity analysts from investment bank J.P. Morgan came away from a recent visit to companies in the London insurance and reinsurance market with the impression that underwriters feel there is plenty of headroom left in the higher attachment points still installed across the sector, despite inflationary influences on losses.

“We came away from the tour with the feeling that the market is still in a good place; rates might be starting to weaken but they remain at highly adequate levels with the potential for strong ROEs for at least the next couple of years,” the analysts said.

While pricing trends are slowing across reinsurance, the J.P. Morgan analyst team note that they remain at “very healthy levels”, saying that while reinsurance softened through 2024 “the picture remains positive overall.”

“While there was a softening in price, it was considered that terms and conditions remained robust and attachment points were still at attractive levels,” the analysts reported.

Saying, “We had been slightly concerned about whether the material improvement in attachment points had been eaten away by inflation but we came away reassured that there is still plenty of headroom before the increase in retentions disappears.”

As a result, the London market insurance and reinsurance constituents that J.P. Morgan’s analyst team met with are largely confident that attractive underwriting opportunities exist.

“The view was almost universal that given the rate adequacy of pricing, there were likely to still be opportunities to grow and expand portfolios in 2025,” the analyst team explained.

The analysts highlighted in their report, that some attachment points do get adjusted for inflation, which tends to result in further upwards movement given the general inflationary trajectory seen around the world.

This resulted in attachments being “broadly flat in nominal terms” at the 1/1 reinsurance renewals and the majority are still at healthy levels, despite any inflationary influences.

The outlook for April 1st reinsurance renewals in Japan and South Korea had always been for a continuation of January’s softening trend.

It seems that in some cases the Japanese rate softening has been perhaps slightly faster than January, with some layers of towers seeing rate decreases in the double-digits, but overall we’re told the perception is that attachments have largely held again and some have been adjusted for inflation.

J.P. Morgan’s analysts said that the sentiment in London during their recent visit was that the recent wildfires might dampen price softening at the US renewals at the mid-year.

As rate-on-line stagnates, or softens, it’s going to be incredibly important for underwriters to take into account the effects of inflation on exposure and therefore ensure attachments are being kept at sufficient levels.

It would be very easy to allow for the effective attachment points to come down, as a lever for sustaining more rate per unit of risk in property catastrophe reinsurance renewals.

But the market has been there before, in the last softening cycle through the early to mid 2010’s, when there was little control of attachments and terms or conditions that in some cases caused meaningful increases in the probability that reinsurance layers attached.

While there may be plenty of headroom in attachment points at this stage and the market has appeared disciplined on this front, it’s important that other terms and conditions are not weakened to the degree that attachment risk rises unduly, while underwriters and insurance-linked securities (ILS) managers also need to keep a grip on inflation.

So many factors go into deriving a probability of attachment, for a reinsurance layer or an instrument such as a catastrophe bond. Inflation can undermine attachments if it’s not properly measured, considered and factored in.

But it’s also key to capture all forms of inflation, through the exposure base but also in the economy and how each can affect claims quantum, development and follow-on costs that can drive claims higher such as rebuilding.

While headroom still exists at this time, there’s no guarantee it will remain in a year or two’s time if the market becomes increasingly aggressive and competitive at renewals, or falls back into its old habit of placing the importance of securing volumes higher than sustaining profitability.

Plenty of headroom left in higher reinsurance attachments, despite inflation: J.P. Morgan was published by: www.Artemis.bm
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Insured losses from the Los Angeles wildfires, which are currently estimated between $35-$50 billion, could support property catastrophe pricing heading into the mid-year reinsurance renewals, according to Goldman Sachs, however, analysts still expect mid-year rate trends to remain broadly in line with the January 2025 renewals.

Analysts highlight that the big four reinsurers: Munich Re, Swiss Re, Hannover Re, and SCOR, have already absorbed between 24% and 42% of their full-year natural catastrophe budgets due to the first-quarter wildfire losses.

“It remains very early to fully assess the impact on the mid-year renewals, however, the scale of the losses could suggest some upward pressure, although we are still of the view that mid-year renewals will be broadly consistent with what we have seen in January,” Goldman Sachs said.

Despite the severity of the California wildfire losses, Goldman Sachs maintains that the property and casualty (P&C) reinsurance market is in a post-peak margin cycle, following years of rate increases. This was reflected in the January 2025 renewals, where risk-adjusted pricing declined by 0%-2%, across Goldman Sachs’ coverage.

Notably, SCOR’s pricing remained flat, benefiting from lower retrocession costs, while Hannover Re saw a 2.1% decline.

These trends, combined with strong reinsurer returns, increased capital availability, and rising frequency loss activity for primary insurers, contributed to the first overall rate decline in nearly a decade.

While the Los Angeles wildfire losses may help limit further rate declines, Goldman Sachs remains cautious on any significant upward pricing movement at the mid-year renewals.

Analysts suggest that despite the large industry losses, overall reinsurance pricing will likely remain broadly consistent with January trends.

However, this could change if further catastrophe events were to strain budgets and capital availability across the market in the coming months.

As the mid-year renewals approach, market participants will closely monitor how capital levels and loss experience evolve, particularly given the uncertainty surrounding wildfire-related claims and broader catastrophe activity in the months ahead.

LA wildfires may support mid-year rate expectations for property cat: Goldman Sachs was published by: www.Artemis.bm
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Following a mixed pricing environment at the January 1st, 2025, reinsurance renewals, analysts at Moody’s anticipate property catastrophe reinsurance pricing to stabilise somewhat at the upcoming US mid-year renewals, driven by the impacts of Hurricanes Helene and Milton, and the more recent California wildfires.

In a new report, Moody’s noted that several key reinsurance brokers and European carriers have provided updates on their experience at the January 1st renewals, which is when typically between 40% and 60% of a global reinsurer’s portfolio is renewed, including much of the European business.

Among the big four European reinsurers, all except Munich Re, which saw a decline due to underwriting actions, reported premium growth at the renewals, as firms sought to deploy capital in a “still-attractive pricing environment,” albeit softer than a year earlier at the 1/1 2024 renewals.

Moody’s said: “Pricing across the portfolios of these European reinsurers was generally flat, ranging from a -2.1% decrease reported by Hannover Re to a 2.8% overall increase reported by Swiss Re. For its nonproportional business, SCOR reported the first pricing decease (-0.8%) since the January 2017 renewals.”

However, as reported by reinsurance broker Guy Carpenter, the US property catastrophe reinsurance segment witnessed an overall rate decline of 6.2% at the January renewals, which was the first decrease seen since the January 2017 renewal period.

Moody’s added: “Generally, pricing was largely stable in working layers – the lower levels of reinsurance used for more frequent and smaller claims.

“However, pricing was lower at the top end of reinsurance programs where there was plenty of capacity available for coverage of less frequent and larger claims, for which pricing remains attractive on a risk-adjusted basis.”

Shifting attention now to the mid-year reinsurance renewals, which particularly focuses on the US, the country has witnessed some heavy nat cat loss activity throughout the last several months.

Moody’s commented: “The upcoming midyear 2025 reinsurance renewals, which focus on the US, will be influenced by large US catastrophe loss events over the past year, particularly Hurricanes Helene and Milton and the Los Angeles wildfires, which are likely to provide support to reinsurance pricing for US exposures.”

Concluding: “Because many renewing US accounts have experienced losses from Hurricanes Helene and Milton and the recent wildfires in California, we think it is likely that US property catastrophe reinsurance pricing will stabilize, supported by the potential for significant price increases for accounts that have had sizeable losses over the past year.”

US property cat reinsurance rates to stabilise at mid-year renewals, says Moody’s was published by: www.Artemis.bm
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