Articles from February 2025

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Global reinsurance giant Swiss Re disclosed that it anticipates losses from the January 2025 wildfires in Los Angeles, California will be below $700 million, while also reporting strong growth at the January renewal season for its property and casualty reinsurance business.

Swiss Re saw its group net income rise to $3.24 billion for full-year 2024, a slight increase on the $3.14 billion generated in 2023.

It resulted in a 15% return on equity (ROE) for the reinsurance company last year, which was slightly down on 2023’s 16.2%.

Group insurance revenues reached a new high of almost $45.6 billion for the year in 2024, up from the almost $43.9 billion of 2023.

All this despite the meaningful reserve strengthening previously announced after Q3 2024 for US liability exposures, which dented the result.

Swiss Re’s Group Chief Executive Officer Andreas Berger commented “Our focus in 2024 was on profitability and resilience. Our results for the period reflect this and show that we are on the right track: we have delivered strong net income and ROE, while achieving our goal of positioning overall P&C reserves at the higher end of our best-estimate range.”

Swiss Re’s Group Chief Financial Officer John Dacey added, “The strong underlying Business Unit performance is being supported by continued underwriting discipline and recurring investment income. The Group’s earnings power, combined with the reserving actions taken in 2024, give us confidence to increase the pay-out to investors by proposing an 8%
higher ordinary dividend of USD 7.35 per share.”

Swiss Re’s P&C Reinsurance division delivered net income of $1.2 billion for the full-year 2024, down on 2023’s $1.5 billion by around 20%, due to the aforementioned US casualty reserving actions.

But, even with large natural catastrophe losses of $1 billion for last year, the P&C Re division at Swiss Re still reported an 89.7% combined ratio for 2024.

As a group, Swiss Re also experienced a further $344 million of large nat cat losses in its Corporate Solutions division in 2024.

Targeted growth was a feature of Swiss Re’s 2024, with natural catastrophe and property reinsurance business volumes both increasing during the year.

Which has now continued at the January 2025 renewal season, as Swiss Re reported a 7% increase in reveal premium volumes to $13.3 billion for its P&C Re business at 1/1.

In addition, P&C Re achieved a price increase of 2.8% at the January 2025 reinsurance renewals.

Diving into the details of Swiss Re’s renewal, the reinsurer said that it adopted 4.2% higher loss assumptions, which are reflective of its prudent view on inflation and loss model updates, especially in casualty risks.

The company said that its strong renewal portfolio quality and a net price change of -1.5% remain supportive of a combined ratio target of below 85% for 2025.

There was around $500 million of business premiums that Swiss Re opted to non-renew at 1/1, as well as $900 million of new business secured.

Natural catastrophe premium volumes renewed rose by 2%, while property premium volumes soared 28% at the renewal season, while the strongest regional growth was in the EMEA at 11% and Americas at 4%.

For 2025, Swiss Re has adopted a large nat cat loss budget of $2 billion.

Obviously, the Los Angeles, California wildfires in January 2025 have taken an early bite out of the catastrophe budget for the current calendar year.

Swiss Re disclosed that it anticipates its losses from the LA wildfires will be below $700 million, impacting the first-quarter Group results.

The reinsurance company has based its estimate on an industry loss estimate of approximately $40 billion for the California wildfire event.

Later in the day, John Dacey, CFO explained that Swiss Re anticipates some recoveries from its retrocession for the wildfires.

Dacey said, “We think generally, within the $40 billion, about a third of this will be coming to the reinsurance market and multiple carriers, including frankly ourselves, are likely to offload some of the gross loss onto the retro programs that have been put in place by ourselves and other reinsurers.”

Looking ahead, Swiss Re targets $4.4 billion of group net income for 2025, ROE of above 14% and a P&C combined ratio of below 85%.

It’s testament to the strength of these global reinsurance businesses that they can come out with strong full-year targets even after a catastrophic event like the wildfires so early in the year.

CEO Andreas Berger further stated, “All our businesses have started 2025 in a strong position, thanks to the resilient foundation we have created and disciplined underwriting as evidenced by the successful January renewals. We remain focused on delivering on our targets for the year and reaching our cost efficiency goals.”

Swiss Re says LA wildfire loss below $700m, grows P&C Re 7% at Jan renewal was published by: www.Artemis.bm
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Global reinsurance giant Munich Re has estimated that the January 2025 wildfires in Los Angeles, California could cost the company around €1.2 billion in losses, while also reporting today that it pulled-back slightly at the January renewals and discontinued business that did not meet its targets.

Munich Re today reported another stellar set of results, surpassing its profit target for the fourth year in a row, while delivering a net result of €5.7 billion that outperformed its initial guidance by €700 million.

Joachim Wenning, CEO and Chair of the Board of Management, said, “With a net result of €5.7bn, we’ve increased our annual profit by more than €1bn year on year. Munich Re’s profit growth has been truly substantial and sustained in the context of our five-year Ambition 2025 strategy programme, which we’ll conclude at the end of the year. This year’s record dividend of €20 embodies our success. Our shareholders will also benefit from a new share buy-back with a volume of €2bn, an increase of €500m. What’s more, we’ll remain ambitious as we seek to boost our annual profit to €6bn this year. Our confidence here reflects our successful renewals as at 1 January 2025, among other factors.”

The reinsurance company delivered a return-on-equity of 18.2% for 2024 and a €5.671 billion net result, although the fourth-quarter saw a net result of €979 million which was slightly down on the previous year.

Property and casualty reinsurance delivered a net result of €3.199 billion, well up on 2023’s €2.448 billion, with a normalised combined ratio of 82%.

That’s despite higher claims expenditure from major losses in 2024, which reached €3.885 billion for the year.

Both man-made and natural catastrophe losses rose year-on-year for Munich Re, at €1.241 billion and €2.644 billion respectively.

Hurricane Helene was the largest loss event of the year for Munich Re at €500 million, while hurricane Milton was a little smaller at €400 million.

Munich Re also reported this morning that the devastating wildfires in Los Angeles in January 2025 are expected to deliver around a €1.2 billion loss across its property casualty reinsurance and specialty insurance divisions, but the company noted “this estimate is subject to a high degree of uncertainty owing to the complexity of the losses incurred.”

Finally, of note, Munich Re also revealed that it trimmed its appetite a little at the January 2025 reinsurance renewals, resulting in a pull-back of sorts.

Munich Re underwrote around 2.4% less business at the key January renewal season, at €15.6 billion in volume terms.

“We consistently discontinued business that did not meet our expectations with regard to prices or terms and conditions.

“Thanks to our close relationships with clients and our sought-after expertise, we tapped into attractive business opportunities – including the expansion of existing client relationships and new business. It was possible to maintain the high quality of our portfolio thanks to stable or improved contractual terms and conditions,” the reinsurance company explained.

Across Munich Re’s portfolio, prices decreased by about 0.6%, with the company saying “price development was stable overall, and for the most part compensated for the higher loss estimates in some areas, which were caused primarily by inflation and other loss trends.”

Munich Re added, “Despite market pressure increasing slightly in the most recent renewal round, Munich Re expects the environment to remain positive in the upcoming April and July renewal rounds – with the attractive price levels and improved terms and conditions largely being upheld.

“It is worth emphasising that recent claims attributable to natural disasters are clearly impeding a softening of prices.”

Despite concerns over potential softening at renewals this year, Munich Re is targeting another uplift in profit target as the higher rates continue to earn through.

For 2025, Munich Re is targeting net profit of €6 billion for the year, up on the initial net profit of €5 billion it targeted and then beat for 2024.

Expecting “an ongoing favourable market environment” Munich Re said it will leverage its market position to continue building the business and delivering more profits, with a combined ratio of 79% in property-casualty reinsurance forecast even after the early wildfires this year.

Munich Re estimates LA wildfire loss of €1.2bn, reports slight pull-back at Jan renewals was published by: www.Artemis.bm
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The Board of the Texas Windstorm Insurance Association (TWIA) met today and one item up for discussion was the setting of the 1-in-100 year probable maximum loss (PML), a critical figure for defining its funding needs for the hurricane season and therefore its purchases of reinsurance and catastrophe bonds for 2025.

With reinsurance costs having been significantly higher for TWIA in 2024, compared to 2023, this was a significant focus of today’s Board meeting.

Drivers of higher reinsurance costs for TWIA in 2024 were a growing exposure base, harder reinsurance market pricing conditions, and the selection of a higher probable maximum loss figure for funding needs last year.

Earlier in today’s meeting, public comment saw a number of public officials from Texas coastal areas calling for the Board to adopt a lower 1-in-100 year probable maximum loss (PML) figure so that the need for reinsurance is reduced in order to lower costs as reinsurance prices have been rising.

A lower PML would mean reduced need for reinsurance limit to be purchased, which some of the public comments said would enable TWIA to put more funding into replenishing the Catastrophe Reserve Trust Fund (CRTF), since it has been completely eroded due to the losses from hurricane Beryl.

Comments urged TWIA to be “reasonable” when it comes to setting the 1-in-100 year PML, with one calling for the Board to adopt the Impact Forecasting model in setting this figure, as it would result in the lowest 100-year loss figure, at just over $4.96 billion as of November 30th 2024.

Last year, TWIA’s Board opted to use a blend of the Verisk and Moody’s RMS catastrophe models, with 25% and 75% weighting respectively and resulted in a $6.5 billion PML, taking a long-term view and including loss adjustment expenses (LAE) of 15%.

If the same formula were to be used again for TWIA’s 2025 storm season funding needs, it would result in a 1-in-100 year PML of just over $7.4 billion.

In the end, last year, the Board of the Texas Windstorm Insurance Association (TWIA) approved the 1-in-100 year PML for 2024 funding purposes at the new high of $6.5 billion, which meant the insurer of last resort needed just over $4 billion in reinsurance limit for the 2024 wind season.

Today’s meeting saw a much lengthier debate than in previous years, largely due to the discussion over the increased cost of reinsurance coverage TWIA faces and the fact the CRTF needs to be replenished.

However, the need to protect policyholders was also acknowledged, with reinsurance seen as one critical tool that enables TWIA to do so.

In the end, TWIA’s Board decided today to define the Texas Windstorm Insurance Association’s 1-in-100 year PML for 2025 using a blend of 50% Aon’s Impact Forecasting, 25% Moody’s RMS, and 25% CoreLogic’s RQE risk model outputs. The Board also opted to use long-term assumptions in the modelling, while loss adjustment expenses would be included again at 15%.

That formula results in a 1-in-100 year PML for TWIA for the 2025 hurricane season of $6.227 billion, including the 15% loading for loss adjustment expenses (LAE).

As a result, TWIA will call on its staff to buy reinsurance, excess of its existing $2 billion of funding from other sources, up to the 1-in-100 year PML, meaning $4.227 billion in reinsurance and catastrophe bonds will be required for 2025.

This is lower than had been projected in recent meetings at the end of 2024, when TWIA set its budget for reinsurance spend.

With $2.1 billion of multi-year catastrophe bonds still in-force but $200 million of that maturing in early June, it means TWIA will have $1.9 billion of cat bond coverage available, as well as some multi-year reinsurance protection still in-force, meaning the Association requires that an additional $1.727 billion of new reinsurance and/or cat bonds will need placing this year.

TWIA’s Board also heard that conversations have begun and preparations for the reinsurance renewal and additional catastrophe bond placements are being made, with the help of its broker Gallagher Re and its insurance-linked securities (ILS) arm Gallagher Securities.

Given how the catastrophe bond market has been executing on recent issuances, TWIA could benefit from the attractive conditions by getting out early this year it seems, so it will be interesting to see whether a new Alamo Re transaction is forthcoming in the next few weeks.

This year, TWIA’s Board were focused on keeping reinsurance costs as low as they could, to minimise the impact on policyholders as costs are passed through, while still providing for the catastrophe funding it requires in case of a major hurricane event.

The change in formula has reduced its reinsurance needs somewhat from the previously budgeted amount, but still TWIA’s reinsurance and cat bond tower will remain one of the larger seen in the United States this year.

TWIA has been directly sponsoring catastrophe bonds since 2014 and remains one of the largest sponsors in our cat bond market sponsor leaderboard.

TWIA sets PML at $6.227bn for 2025, to require $4.227bn of reinsurance & cat bonds was published by: www.Artemis.bm
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Speaking in a recent video interview with our sister publication Reinsurance News, James Vickers, Chairman of Gallagher Re’s International division, suggested that the excess capacity coming into the insurance-linked securities (ILS) space will help to drive innovation and support the development of new lines of business.

Commenting on the record year for cat bond issuance in 2024, Vickers highlighted a series of developments expected this year, including the effects of a new influx of capital.

“I think that the new capacity coming in will make it easier to innovate a bit in the ILS space. I mean, who would have thought there’d be cyber bonds a couple of years ago? They are now building up some momentum. Casualty bonds are also beginning to appear,” Vickers said.

According to Vickers, the excess capacity coming in will help to drive innovation in these new lines, but the heart of the ILS market will remain property catastrophe.

“The new lines of business coming in are extremely interesting, but they’re not really moving the dial, well not at the moment anyway,” Vickers added.

Another point of interest in 2025 that the Gallagher Re executive highlighted is the balance between investors putting their money into traditional cat bonds and those looking at a collateralised approach.

“The spreads on cat bonds have narrowed, and as the pricing on some of these cat risks begins to fall away, the returns may drop a little bit,” he said.

Vickers continued, “If we go back to pre-2021/2022, cat bond pricing had become fairly decoupled from the original pricing. It’s now been completely in line with traditional pricing.

“However, if it drifts too far away, I think we might find investors preferring to move towards a collateralized approach, and perhaps offering traditional incumbent reinsurers collateralized quota shares and writing the business that way, rather than through a pure cat bond instrument.”

Watch the full video to hear more from Gallagher Re’s Vickers on the 1.1 2025 renewals, the property and casualty markets, the insurance-linked securities (ILS) sector, rising cat losses and more.

The full video interview is embedded below.

Increased ILS capacity to support innovation in 2025: Gallagher Re’s Vickers was published by: www.Artemis.bm
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According to Sven Althoff, Member of the Executive Board for Property & Casualty at German reinsurer Hannover Re, the catastrophe bond market is expected to remain active throughout 2025, as it continues to attract additional capacity across the insurance-linked securities (ILS) market.

The reinsurer recently announced that it had increased its natural catastrophe retrocession protections at the January 1st, 2025, reinsurance renewals by EUR 100 million to a little more than EUR 1.2 billion, with growth in the aggregate excess of loss and whole account excess of loss covers more than offsetting a reduced K-Cessions sidecar for the year.

At the January renewals, Hannover Re increased its natural catastrophe retrocession in line with plan, with no changes made to the overall structure of the tower, however the firm did reduce proportional cessions to 33% and increase its non-proportional protection.

During a recent conference call, following the release of its 1/1 renewals outcome, Althoff addressed the 33% reduction, saying, “When it comes to K the 33% cession is right in our sweet spot. So we could have placed more, but that’s where we wanted to end up. There was certainly capacity available to place more, but at 33% we are very comfortable.”

Additionally, Althoff also discussed whether amid the strong cat bond rally, he sees investor demand for spots lower in reinsurance towers rising.

“On the cat bond side, this is a very active market place which continues to attract additional capacity, also from the ILS space. We are ourselves very active in providing transforming services on that side. So, from that point of view, as part of our ILS fee based activities, and we are participating in the increased issuance of those cat bonds.

“We expect that to continue also throughout 2025, but our experience so far has been that our ceding companies are using this to complement their traditional buying of reinsurance business rather than instead of buying on a traditional basis, and we don’t see any short term change in those dynamics.”

Althoff also commented on whether he believes that the cat bond rally has gone so far that the attractiveness to investors of K-Cessions, or other collateralized deals has now reached an inflection point.

He said: “I mean that, of course, very much depends on the risk appetite of the capital behind those underwriting decisions. With a proportional cession, you obviously, in absolute numbers, have much more upside as you are participating in the original risk from relatively low return-periods. While with most of the cat bonds, you are very much at the tail-end of the risk spectrum. So, you are exposed to severity and that is making your probability for loss very remote, but it’s also limiting your upside because the pricing you can get is obviously reflecting this.

Concluding: “So this can only really be answered by the investor base. Some find the full spectrum of cat more attractive than just the tail-end risk. But one thing is certain, there is enough capacity available for both solutions.”

Cat bond market to remain active through 2025: Hannover Re’s Althoff was published by: www.Artemis.bm
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Global re/insurer QBE has said that the January renewals saw the company’s progress validated by its reinsurance partners, as its catastrophe reinsurance protections were renewed with meaningfully lower retentions.

QBE said that the reduction in retentions was achieved thanks to recent reductions in its exposure base, as well as improvements to the quality of its underwriting portfolio, which were recognised by reinsurance markets.

QBE’s main catastrophe reinsurance retention has fallen to $300 million, having sat at $400 million a year ago.

For the US, the retention is at $300 million, down from the prior year’s $350 million.

For Australia, the likely maximum retention is now $260 million, down from $325 million, while for the rest of the world it is now $135 million, down from $250 million.

Otherwise, the company noted that the reinsurance tower remains “broadly consistent” with 2024.

The catastrophe budget for the coming year has been set at $1.16 billion, which is down on a year ago.

QBE explained that the, “Vast majority of reduction in 2025 CAT allowance versus prior year relates to non-core property exits.”

The re/insurer also said, ““As if” analysis highlights the 2025 allowance would have proven adequate in 8 out of the last 10 years. This analysis overlays the 2025 reinsurance program against QBE’s historic catastrophe claims experience (adjusted for inflation and business exits).”

QBE also added $250 million of multi-year collateralized reinsurance against peak North American perils in January, through its first catastrophe bond sponsorship in over a decade, in which it secured the Bridge Street Re Ltd. (Series 2025-1) issuance.

QBE meaningfully reduces catastrophe reinsurance retentions at renewals was published by: www.Artemis.bm
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