Reinsurance Market Conditions Favor Loss-free Buyers At Midyear
Reinsurance buyers saw plenty of capacity for the mid-year renewals as demand for property catastrophe reinsurance ramped up and reinsurers saved their best pricing for loss-free accounts, according to broker reports.
“Despite an active first half for natural catastrophe losses, mid-year renewals experienced a broadly competitive environment as reinsurers, ILS markets and new entrants sought to deploy capacity and grow market share,” said Aon in its Reinsurance Market Dynamics report, adding, “Reinsurance capacity was more than sufficient to absorb a near 10 percent increase in global demand for property catastrophe limit.”
Aon attributed much of the demand to U.S. insurers reacting to the “significant depopulation” of Citizens, Florida’s property insurer of last resort.
“Market conditions are creating opportunities for U.S. insurers as reinsurers are more willing to support program structures and products that were not on the table even six months ago,” said the broker.
In a new report, Gallagher Re said buyers “had the opportunity to challenge the status quo” at mid-year to improve their terms and conditions. They found a reinsurance market largely open to these negotiations.
“Reinsurers came into the renewal in good financial shape,” Tom Wakefield, CEO of Gallagher Re, said in the firm’s 1st View report. “2025’s renewals are showing a consistent trend: a growing market in which the balance of supply and demand has tilted back toward reinsurance buyers.”
He added, “This is a market where cedants and brokers have room to maneuver and reinsurers to innovate – and we are pushing beyond rates to a broader optimization of reinsurance placements.”
CAT Impact
Despite the active first quarter for catastrophe losses, the second quarter produced a leveling-off in insured loss activity, according to commentary from Guy Carpenter. The Los Angeles wildfires in January, with an estimated $40 billion in insured losses, haven’t hindered reinsurers or their appetite for business in 2025.
“The current trading environment is one of the most favorable for reinsurers in many years, evidenced by the additional capital being attracted to the sector,” said Dean Klisura, president and CEO of Guy Carpenter. “We see this as a tremendous opportunity to rebalance the market dynamics in our clients’ favor. More capacity will continue to moderate pricing, give clients more diversification of reinsurance partners, and provide better solutions to protect earnings.”
In fact, capacity exceeded demand by over 20%, the broker added, resulting in risk-adjusted rate decreases between 5% and 15% for loss-free accounts and increases of 10% to 20% for programs with losses.
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Notable Shift
Aon highlighted an ongoing shift in market appetite, declaring the mid-year renewals “notable” for reinsurers’ focus on middle layers and a willingness to offer aggregate covers and protection for lower layers.
“Competition was most intense for middle layers where reinsurers saw premium growth opportunities, and where competitive tension from ILS capital was most felt,” said Aon. “U.S. national and global insurers remain particularly attractive to reinsurers, although Floridian and regional insurers also experienced more competitive pricing at mid-year. Overall, loss-free property catastrophe placements achieved low double-digit risk-adjusted rate reductions, with more moderate reductions for Florida-based and regional U.S. insurers.”
Casualty Constrained
If reinsurers were flocking to property renewals, they showed more restraint on casualty. However, primary market actions like solid rate improvement and diligent underwriting put reinsurance buyers in “a relatively strong position,” Aon said.
“While some reinsurers have pulled back from parts of the U.S. casualty market, others are stepping up, resulting in stable capacity overall,” said Aon. “Reinsurers remain watchful of developments in nuclear verdicts, adverse development and emerging risks, yet recognize the upside of relatively high interest rates, strong underlying casualty pricing and the prospect of tort reform.”
However, reinsurers showed a preference for primary insurers that have a strategy for dealing with the many headwinds facing the casualty insurance market. Accounts with deteriorating loss ratios or no plan of action saw reduced capacity and higher pricing.
“There was a clear market divide. For cedants unable to provide evidence on how they are tackling the performance issues, outcomes were less favorable,” said Gallagher Re’s Wakefield.
According to Guy Carpenter, trading relationships factored into stable outcomes for casualty placements.
“Reinsurers and clients evaluated trading relationships across property, casualty, and specialty programs,” said Guy Carpenter. “Reinsurers looked to find balanced support across all programs for a given client.”
Article Published By: Zywave, Inc.
