This content is copyright to www.artemis.bm and should not appear anywhere else, or an infringement has occurred.
The April 1st 2025 reinsurance renewals are said to have seen a continuation of the gradual softening trend experienced at the start of the year, with reinsurance capital providers displaying strong appetites for growth still, but sources suggesting the overall outcome has remained disciplined.
While there have been some double-digit rate decreases seen, particularly in Japan and for higher-layers of towers, the general feeling is one of markets remaining focused on achieving adequate risk-adjusted returns for deploying capital to April renewal opportunities, as pricing comes off cyclical highs.
With many property catastrophe reinsurance treaties having experienced relatively loss free outcomes for the last contract year, a continuation of January’s softening trend had been largely anticipated.
Speaking with brokers and market participants in the last week, the outcome looks set to be one where many treaties have priced down, on a risk-adjusted basis, but that some larger cedants buying bigger reinsurance towers have also been taking the opportunity to leverage their financial strength to manage renewal costs, particularly in Japan.
Sources in the collateralized market and at insurance-linked securities (ILS) funds told us that they have been satisfied with the April 1st opportunities they have sourced, while also noting a more competitive marketplace and strong appetites from reinsurers that have in some cases made ILS funds be more selective.
As well as reinsurers exhibiting strong appetites for growth at this renewals, which is no surprise given high capital levels and the fact pricing remains robust even with the softening seen, there are also said to have been some additional renewal participants, with some markets returning with a desire to grow into regions that were renewing at April 1.
One of the drivers for that is an impression that some regions renewing at April 1st have experienced strong growth in premium volumes, expanding the available opportunity set. But overall demand for protection across the April renewal has been relatively stable it seems, with additional purchases at some levels in reinsurance towers offset by stronger or larger cedants managing their costs through increased retentions and restructuring of towers.
On a risk-adjusted basis many renewals have come in softer it appears, but this is still only seen as a gradual continuation of recent renewal trends, despite the more competitive marketplace and in some cases growing number of reinsurance panel participants.
Brokers told us that there has been ample capacity to close renewals for April 1st and that their clients, the reinsurance buyers, are largely very satisfied with the favourable outcome.
The broader range of market participants being seen has also included some ILS players who, we’re told, have had some additional capacity to deploy and found opportunities attractive enough to meet their return targets.
Fully-collateralized limit remains less evident at April 1st, compared to other major renewals, given buyers often have a preference for rated paper. There is collateralized ILS deployment into April renewals, but it’s often based on long-term relationships with ILS managers and has never expanded that rapidly.
But, we understand fronted ILS capacity continues to be a participant that is growing in some cases, with some ILS managers said to have have accessed business from new regions and counterparties this year.
Japanese renewals have seen a competitive market environment this year, with softening largely seen, especially for the clients that have been able to demonstrate the best performance, most disciplined growth and where enhanced data granularity has been provided.
As a result, renewals are seen as risk-adjusted down by single digits and close to double-digits, for the majority, or into double-digits for top-performing cedants and larger catastrophe excess-of-loss towers, especially at higher-layers.
Reflecting the discipline still being seen, we’re told that the performance of an underlying treaty has been a key in April renewal outcomes, with markets pushing back on much lower rates in some areas, while reductions have been highest for cedants that can demonstrate their performance and provide enhanced portfolio data to assist reinsurance markets in their pricing.
But, perhaps making the outcome a little less clear, Japan renewals saw some larger buyers opting to manage the costs of their reinsurance purchases by retaining more risk against their backdrop of strong results and robust financials. Some have also been keen to buy more cover higher-up as a result of this trend, we are told.
Another major April 1 renewal market is India, where there were flatter risk-adjusted outcomes for many, but some softening seen, again for the best performing cedants. Here there has also been some demand increase it appears, although this is on the back of strong premium volume growth, we understand.
The Philippine market is thought to have also experienced a softening market for reinsurance at the renewals, although with some greater differentiation seen. Other parts of Asia are said to have experienced similar outcomes.
On the all-important terms and conditions, sources said the majority remain relatively unchanged, aside from adjustments where retentions have been adjusted to account for growth, or financial strength, often at the behest of the cedant itself, another sign of cost management in a still harder reinsurance market price environment.
Rates-on-line remain higher than where they were five years ago, even with the continuation of the January softening trend at April 1st, but we understand markets did push-back on early attempts to push for greater reductions this year, seemingly keen not to see the rate environment return to the levels seen around 2017.
Guy Carpenter’s APAC property catastrophe reinsurance rate-on-line Index was still up by 32% after the January renewals, since the market bottomed out in 2018 for this region.
When this index is updated to incorporate the April 1st outcomes, it seems likely the 2025 figure will fall a little further given the sentiment we’re hearing from the market.
There are some reinsurance renewals in the United States at April 1st and here we’re told that again, the outcome is seen as similar to January, however with more differentiation evident dependent on loss experience and with the recent California wildfires being factored in.
We understand there has been some demand increase in the US, while there has also been a little more retrocession buying and that this has experienced competitive markets as well.
In the coming days we expect to get more colour as broker reports on the April renewals come out, so stay tuned for additional insights.
Read all of our reinsurance renewals news and analysis.
April reinsurance renewal sees softening trend continue, but discipline maintained was published by: www.Artemis.bm
Our catastrophe bond deal directory
Sign up for our free weekly email newsletter here.