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Insured losses from the Los Angeles wildfires, which are currently estimated between $35-$50 billion, could support property catastrophe pricing heading into the mid-year reinsurance renewals, according to Goldman Sachs, however, analysts still expect mid-year rate trends to remain broadly in line with the January 2025 renewals.
Analysts highlight that the big four reinsurers: Munich Re, Swiss Re, Hannover Re, and SCOR, have already absorbed between 24% and 42% of their full-year natural catastrophe budgets due to the first-quarter wildfire losses.
“It remains very early to fully assess the impact on the mid-year renewals, however, the scale of the losses could suggest some upward pressure, although we are still of the view that mid-year renewals will be broadly consistent with what we have seen in January,” Goldman Sachs said.
Despite the severity of the California wildfire losses, Goldman Sachs maintains that the property and casualty (P&C) reinsurance market is in a post-peak margin cycle, following years of rate increases. This was reflected in the January 2025 renewals, where risk-adjusted pricing declined by 0%-2%, across Goldman Sachs’ coverage.
Notably, SCOR’s pricing remained flat, benefiting from lower retrocession costs, while Hannover Re saw a 2.1% decline.
These trends, combined with strong reinsurer returns, increased capital availability, and rising frequency loss activity for primary insurers, contributed to the first overall rate decline in nearly a decade.
While the Los Angeles wildfire losses may help limit further rate declines, Goldman Sachs remains cautious on any significant upward pricing movement at the mid-year renewals.
Analysts suggest that despite the large industry losses, overall reinsurance pricing will likely remain broadly consistent with January trends.
However, this could change if further catastrophe events were to strain budgets and capital availability across the market in the coming months.
As the mid-year renewals approach, market participants will closely monitor how capital levels and loss experience evolve, particularly given the uncertainty surrounding wildfire-related claims and broader catastrophe activity in the months ahead.
LA wildfires may support mid-year rate expectations for property cat: Goldman Sachs was published by: www.Artemis.bm
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