Heading into the January 1 renewals, unless there’s a major catastrophe, property and casualty (P&C) reinsurance prices are expected to decline, according to analysts at Morgan Stanley.
The 2025 reinsurance market outlook is shaped by a more subdued pricing environment in 2024 and manageable risks from this year’s hurricane season. While reinsurers have largely exceeded expectations with strong underwriting results, recent trends suggest that pricing power could face pressure, leading to a softer market.
“The recent capital return announcements from Arch Capital and RenRe could indicate a softer market environment going forward, as the return was not enough to siphon excess capital from the reinsurance system,” said Morgan Stanley.
As for the 2024 hurricane season, the impact has been manageable so far, but Hurricane Milton is expected to affect the fourth quarter. Major reinsurers like Everest, Hamilton, and RenRe have shared estimates of the losses from Milton, which Morgan Stanley believes will be manageable for these companies.
Investors have shown less optimism about the reinsurance market as the year concludes. However, with disciplined underwriting practices in place, reinsurers should be well-positioned to manage catastrophe losses, with attachment points and tight terms & conditions continuing to hold strong.
“While reinsurers generally printed strong results, Arch and Everest are still undervalued, in our view. As we head into 2025, the key will be around pricing for the upcoming Jan-1 renewals. We continue to Overweight Arch and Everest,” analysts added.
