Analysts at Berenberg have said that in light of the strong performance of the reinsurance sector in recent years and the fact there’s no build up of excess capital, reinsurance pricing at the January 1st, 2025, renewals is expected to be stable.
According to analysts, stability at 1.1 could drive an acceleration of underlying margins as reinsurers will benefit from the tailwind of two years of hard markets to support both earnings and buffers.
“Our thesis is that the continuing growth of natural catastrophes (nat cats) at c10% per year means that there is no excess capital buildup among the traditional reinsurers, as demand for cover utilises the generated capital. As such, we expect stable pricing at the January 2025 renewals,” say analysts.
Berenberg’s flat rate outlook for 1.1 2025 follows its meetings with 11 investors in the US last week, where reinsurance pricing and the longevity of the hard market cycle was a theme.
“In the case of reinsurance, we believe that the significantly higher margins we expect in 2025 would be used to boost reserves, rather than fund price competition,” explain analysts.
Adding, “We also believe that the ripple effect of a continuing hard market in reinsurance would also help to maintain pricing discipline in the rest of the insurance market, including in personal lines.”
