Property catastrophe reinsurance post Q1 2025 results indicate that while there is ongoing rate pressure, market discipline and strong cedent demand are helping to maintain a healthy balance for the property catastrophe reinsurance market, according to a recent Peel Hunt analyst report.
The report highlights that rate adequacy and returns on capital in the property cat market remain “very attractive”, even as renewal rates at January 1 saw declines of 7%, which continued in Japan on 1 April.
“The market is remaining disciplined, with underwriters emphasising that terms & conditions and attachment points are holding up,” analysts stated.
The report also noted that there are no immediate signs of an influx of new capital coming into the property cat reinsurance market. However, traditional reinsurers abundant supply of capacity
Reinsurers continue to underline that returns on capital remain well above the cost of capital, and overall property cat internal rates of return (IRRs) remain “fairly similar” to 2024.
Looking ahead, Peel Hunt analysts observed that reinsurers plan to remain more cautious about growing exposures in the remainder of the year, after committing some growth capital during Q1 2025.
Many reinsurers are suggesting that any further growth” would be opportunistic or a commitment to grow selectively with their cedents.”
“We have not come across any major reinsurer suggesting it would pull back from Property catastrophe underwriting, albeit one or two are likely to pause exposure growth and let attractive rates earn through,” analysts added.
Cedent demand for cover remains robust, effectively absorbing some of the surplus capital within the industry. This strong demand is expected to continue into the US renewals in June/July.
Ahead of Florida renewals, Peel Hunt analysts stated that property cat reinsurers believe that rates will be flat to soft, depending on whether loss-affected lines are being renewed.
“We have not read any expectations that rates would harden at the June/July renewals, even after an active six months in terms of catastrophe losses,” analysts said.
While loss-affected classes or lower down programme towers could be priced at a premium, this is unlikely to “move” the broader market, according to the report.
Conversely, pricing for peak limits at the top of programmes is likely to continue its downward trend.
“Some may be looking to selectively grow exposures in Florida, whilst other will likely hold the line. The general commentary is of a balanced market, with demand meeting ample supply of capital and no change in terms & conditions anticipated,” Peel Hunt concluded.
