Global credit watcher Fitch Ratings has recalibrated the year’s reinsurance outlook to “improving” from “neutral” a while earlier to reflect the sector’s strengthening financial performance going into 2024.
It projects reinsurance prices to increase near term and outpace claims as underwriting peaks next year.
“Rising reinvestment yields and strong demand for reinsurance should increasingly support earnings. We believe pricing for natural catastrophe risks will better reflect the impact of climate change on claims, particularly as several reinsurers are cutting back on cover for medium-sized natural catastrophe risks, making pricing less competitive” Fitch reported.
According to Fitch, global reinsurers were to write premium totaling $183.8 billion this year accelerating to $197.6 billion next year.
Catastrophe losses of around $16 billion this were was similarly forecast to hit $17 billion next year.
“Further price rises in property lines are likely in 2024, together with tighter terms and conditions, after several years of poor underwriting results due to inadequately priced risks, the impact of climate change on claims, and unexpectedly high inflation. However, the increases are likely to be more moderate than in 2023 as prices approach or surpass rate adequacy. Prices for casualty lines should be stable in 2024 due to an ample allocation of reinsurance capital and significant repricing by primary insurers in recent years to offset high levels of social inflation.
“Fitch expects the sector to maintain very strong capital in 2024. However, better underwriting margins could lead to greater capital repatriation if capital cannot be deployed to grow business at attractive margins. Renewed interest from institutional investors due to higher expected returns could lead to an influx of alternative capital to the sector, and Fitch expects the abundance of traditional and alternative capital to lead to a gradual softening of the reinsurance market from 2025,” it said.
