Re/insurance executives have expressed cautious optimism for 2025, though outlooks differ between property catastrophe and casualty lines, according to KBW analysts following this year’s AIFA conference.
While property catastrophe reinsurance appears poised for steady returns, social inflation continues to cast a shadow over casualty markets which are expected to experience limited premium growth.
KBW said: “Reinsurance executives remain confident about expected property catastrophe reinsurance returns, as attachment points hold steady and small rate decreases only modestly reverse prior years’ more dramatic rate increases.”
Executives cited sufficient capital to meet growing demand, including back-up covers for some smaller cedents impacted by California wildfires. However, a slight tightening of terms and conditions is anticipated, potentially limiting cedents’ flexibility in classifying catastrophe events.
In comparison, most executives remain broadly cautious about writing casualty reinsurance, analysts highlighted.
Market pricing, particularly ceding commissions on quota share policies, is not adequately reflecting the persistent challenges of social inflation, which has led to widespread reserve strengthening.
KBW stated: “One reinsurance executive suggested that the industry hasn’t seen (we’d probably use the word ‘acknowledged’) the worst of social inflation yet, which should sustain or accelerate significant primary casualty rate increases, and should also eventually – but has not yet – manifest itself in casualty reinsurance pricing.
“In the interim, we expect very careful cedent selection and limited casualty reinsurance premium growth that mostly reflects higher primary casualty rates.”
Analysts also touched on the Bermuda tax landscape, noting that most Bermudian reinsurers are anticipating the eventual reversal of deferred tax assets (DTAs) booked in late 2023, with a common timeframe of two years.
According to KBW: “None of the companies we met with are worried about current or prospective capital adequacy, and most are open to share repurchases in the absence of meaningful premium growth opportunities.
“In the interim, Bermuda tax law allows companies to utilize their legally established DTAs. At some point (possibly later this year), Bermudian regulators will identify offsets – like lower payroll or property taxes to ‘compensate’ Bermudian companies for the corporate income tax – that should lower the (re)insurers’ expenses (potentially retroactively), but we think that’s unlikely to emerge in 1H25.”
Despite the challenges in casualty, the overall sentiment among P&C re/insurers at the conference was cautiously optimistic for 2025.
KBW expects share price outperformance across P&C for well-reserved re/insurers that can capitalise on market opportunities and mitigating risks, as well as from brokers positioned to outpace decelerating organic revenue growth tailwinds.
The post Re/insurance executives cautiously optimistic on P&C: KBW appeared first on ReinsuranceNe.ws.
