What's Happening?
Global reinsurers are moderating their appetite for catastrophe risk in 2025, maintaining exposure at 21% of adjusted capital, according to S&P Global Ratings. This decision follows several years of expansion and is influenced by softer pricing conditions. Insured losses from natural catastrophes reached $137 billion in 2024, but primary insurers absorbed most of these losses. Despite challenges such as claims inflation and climate variability, reinsurers are expected to maintain strong capitalisation, with pre-tax profits forecast at $51 billion.
Why It's Important?
The decision to hold steady on catastrophe risk reflects the reinsurers' strategic approach to managing volatility and ensuring capital adequacy. This stability is crucial for the industry's resilience against severe stress scenarios, such as high insured losses. The focus on maintaining strong underwriting margins and capital surplus highlights the importance of disciplined risk management in the face of climate-related challenges. The reinsurers' ability to withstand significant losses without breaching capital adequacy is vital for investor confidence and market stability.
