President and Chief Executive Officer (CEO) of Bermudian reinsurer RenaissanceRe (RenRe), Kevin J. O’Donnell, expects U.S. catastrophe limit purchases to increase by around $10 billion in 2025, and foresees property cat reinsurance rates trading at current levels at the January 1st, 2025, renewals.
The structural changes implemented by reinsurers, as well as current pricing for property cat business, is expected to persist in 2025 amid a disciplined marketplace, and given primary insurers are now retaining more losses from secondary but increasingly impactful events, demand for reinsurance has been on the rise.
During RenRe’s third quarter 2024 earnings call, CEO O’Donnell discussed the upcoming property reinsurance renewals against a backdrop of elevated cat activity, higher retentions and improved pricing dynamics.
“This market began hardening after Hurricane Irma and accelerated after Hurricane Ian. Unlike prior cycles, however, we have yet to experience an influx of new capital, with the exception of certain corners of the market where we do not heavily participate, such as cat bonds. As a consequence, the market remains disciplined, with reinsurers holding on retentions and terms and conditions,” said the CEO.
At the same time, he continued, demand for coverage continues to increase, leading RenRe to estimate than an additional $10 billion of US cat limit will be purchased next year.
“This should lead to new opportunities over the course of 2025 while keeping the rate environment favorable. We expect similar opportunities in other property where Helene and Milton should ensure that rates remain at attractive levels,” he explained.
During the Q&A, RenRe’s CEO expanded on this and provided some more detail on where he expects rates to trend at 1.1 2025.
“That additional demand will help stabilize the pricing environment,” he said. “So, when we go in, we believe rates are fair and adequate for the property cat market, and that’s the way we’ll approach the renewals. And I think it will trade, as we’ve said before, at the new level, in which the market reset to in the beginning of 2024. Equally important, I think the slips that are in place with the level of retention will likely persist as well. So, the reset in retentions, I think, will continue, and I think rates will be, as with any financial market, but they’ll trade roughly around the level that we’re at.”
David Marra, RenRe’s Group Chief Underwriting Officer (CUO), also commented on the property cat market at the January renewals, noting that while it’s too early to predict the outcome, the company was anticipating more demand prior to the landfalls of Helene and Milton.
“Rates remain favorable and we will continue to grow with existing customers while capitalizing on opportunities to increase our market share of attractive placements,” he said.
Later in the call, the impacts of US hurricanes in 2024 and the severe flooding in parts of Europe on 2025 renewals was also debated by both the CEO and CUO.
“That’s in the bucket of attritional losses that we’re seeing in North America and in Europe. So, it does have the impact of keeping the conversation around stability and retentions and how important that is to the reinsurance market. So, we see that in US and Europe, we’re expecting stable retention, stable structures, and the conversation is around price. And, like we say, that price will trade around the current levels we’re at. We see opportunities with our market position post-Validus to potentially deploy capital in both sides, both in North America and in Europe,” said Marra.
“Milton is a Florida event. So, I would say that if there are to be loss specific discussions, those will be largely more 6.1. I also believe that the market’s matured a bit with what happened in 2024 and discussions around loss and loss affected covers and that being the only catalyst for sustaining rate are no longer really the fixture of the market. I think everybody recognizes that today’s structures and today’s prices will persist,” said O’Donnell.
