The property reinsurance market continues to soften and is not without its challenges as sellers continue to scrutinise secondary perils and re/insurers struggle to develop a universal view on the impact of tariffs and inflation on losses, according to report from broking group Lockton.
It’s no secret that property reinsurance rates have softened from the highs of 2023, but as noted by numerous executives at RVS in Monte Carlo earlier this month, softening does not mean it’s a soft market. While conditions are now more favourable for buyers, there’s still an appetite from reinsurers to grow their property books as rates, in many instances, are still deemed adequate.
As noted by Lockton, capacity remains strong, and while there is increased competition among reinsurers, there’s not yet signs that companies are looking to secure deals by significantly undercutting the market on pricing.
Discipline has been key for reinsurers in recent times, and there’s a real need for this to be maintained to avoid some of the challenges of the recent soft market years. Importantly, though, Lockton explains that attachment points, terms and conditions, and limits have remained stable since the reset in 2023.
“Barring a major catastrophe or other event, however, pricing is expected to continue to trend downward through the end of 2025,” said the broker.
Just how far property reinsurance rates fall at the January 2026 renewals remains to be seen, and will also depend on loss activity through the rest of the year. At RVS, one of the themes from brokers was a need for reinsurers to be innovative to meet client demand for earnings protection, as the primary market has absorbed much of the losses from secondary perils such as floods, wildfires, and severe convective storms, but it’s not yet clear how willing reinsurers are to again cover these frequency risks in a meaningful way.
“Property reinsurers continue to scrutinise so-called “secondary” perils, while wildfire and flood risks remain difficult to price and underwrite. Insurers also remain uncertain about the impact of tariffs and inflation on losses; the market has not developed a universal view of how these trends will affect conditions,” said Lockton.
Property reinsurance often grabs the headlines, but the casualty space has been a hot topic in recent times, given the issues in the US with prior underwriting years, which led to some significant reserve strengthening by certain players. It’s a complex line of business with many subclasses, but as noted by Lockton, “the reinsurance landscape for liability has remained largely consistent, continuing to support a marketplace in which rates are escalating, but in a relatively predictable manner.”
“Treaty pricing is generally steady, supported by ample capacity and optimism among some reinsurers. However, profitability in casualty reinsurance remains uncertain; one reinsurer with a casualty-heavy portfolio recently exited the space, while others are scaling back due to disappointing calendar year outcomes,” continued the broker.
Although there’s some pull-back, some reinsurers, and notably new entrants, view the current casualty reinsurance market as a strategic opening, according to Lockton. “We also anticipate a slight pivot toward additional capital deployment in casualty due to budget pressures associated with declining property rates.”
On cyber, Lockton’s report states that reinsurers remain bullish and are “showing greater appetite to deploy capacity across existing and new portfolios on a quota share or excess of loss basis.”
“Since the fourth quarter of 2024, several new reinsurers have entered the space, adding capacity and driving improved ceding commissions and loss ratio caps, risk-adjusted rate decreases, and more consistent terms. Cedants have shifted their focus to tail risk as they seek to optimize their portfolios through low-attaching event covers, time-bound aggregate protections, and other structures. Traditional proportional reinsurers have begun to deploy capacity in the nonproportional space to meet rising demand for excess of loss products,” reads the report.
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