The global market for property catastrophe reinsurance is getting more competitive and analysts at Evercore ISI say they expect capital flows to the sector will continue, which they believe could result in demand being outstripped.The inevitable result of that would be further softening of property cat reinsurance rates and the analysts forecast further declines through 2025.The reinsurance market and its participants turned out to be more disciplined than expected at renewal seasons in 2024, Evercore ISI analysts explain.But, “We do not see this discipline continuing… as capital levels remain at all-time highs, some new capacity starts to enter (Oak, Mereo, Lloyds, likely to be more at 6/1), ILS re-ups and early predictions are for a ‘normal’ ’25 storm season,” they continued.

Adding that, “As a result of building capital levels and more competition, we see pricing under more pressure throughout ’25.” It’s important to note that may now have some effects in reinsurance, although still capital build-up may exceed capital lost or eroded, some analysts continue to suggest.Reinsurance capital levels are at new heights, with both reinsurance brokers and Aon reporting new record figures for both the traditional and alternative capital, or insurance-linked securities (ILS), sides of the market in their latest reports.Evercore ISI’s analysts said, “We think the growth in capital will outstrip growth in demand, resulting in pressure on property cat pricing that will likely accelerate throughout 2025.” Also saying that, “With increased capacity in the market outweighing demand, and our view of a peaked property cat opportunity and cautious environment in casualty, competition for deployable opportunities is more intense in 2025 as more capital vies for deployable opportunities.” Commenting on what this means for the reinsurance firms under their analysis, the Evercore ISI team state, “While terms and conditions are holding firm (i.e.

higher attachment points) and rate levels are still solid, we believe the growth will slow, ROEs will deteriorate and cause P/BV de-rating.“We estimate growth will slow by more than expected across the reinsurers although this is likely going to be slightly offset by capital return.” The analysts sum up that they are now “negative on the reinsurers” as they believe there is “downside” to property cat pricing and suggest that this could accelerate into the mid-year renewals.2025 is going to be a very interesting year, across reinsurance and of course our home turf of catastrophe bonds and insurance-linked securities (ILS).

While capital is building and set to come back to fund managers through maturing transactions in the ILS market, there will no doubt be an excess at times, unless demand can pick up again.Loss activity is the main wildcard that could moderate price softening throughout the course of the year and of course what everyone will be watching closely is the levels of discipline on key contract features such as attachment points.It’s worth noting that there are also capital providers in the industry now that have become accustomed to hard market returns.

So it will be interesting to see what reactionsany persistent softening of catastrophe reinsurance may elicit from these parties.As we said, the recent wildfires are going to erode reinsurance capital to a degree in some parts of the market, but there is ample to fill those gaps already, plus more on the sidelines, while any sign of firming of catastrophe rates could just attract even more capacity to the sector.Which makes underwriting and capital deployment discipline the real source for any future flattening or firming of rates at renewals..

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