Morningstar DBRS, a provider of credit ratings, research, and risk analysis, highlights that global P&C reinsurers delivered strong profitability in 2024, driven by favourable underwriting conditions and solid investment income, but warns of potential challenges ahead amid market volatility, geopolitical risks, and natural catastrophe events.
Morningstar DBRS has shared commentary on the global property and casualty (P&C) reinsurance sector, assessing its performance in 2024 and potential challenges for 2025.
Companies such as Axis Capital Holdings, Hannover Re, Munich Re, and Swiss Re reported growth in net earnings, although overall industry net income saw a slight decline, dropping from $32.4 billion in 2023 to $30.9 billion in 2024.
This decrease was primarily attributed to SCOR Re’s adjustments to its Life & Health insurance assumptions and significant losses from Lloyd’s due to natural catastrophe events and market volatility in the final quarter.
Despite these challenges, reinsurers based in Bermuda made a positive contribution to the sector’s aggregated net income, underpinned by solid underwriting and investment results.
However, Morningstar DBRS revised its outlook for the P&C reinsurance industry from positive to stable due to growing geopolitical risks and economic uncertainties, including the potential impact of US tariffs and the evolving actions of central banks in response to inflationary pressures.
The commentary also stressed that, while reinsurers performed well in 2024, the risk of further natural catastrophe losses remains a key concern, with predictions for an active hurricane season in 2025 adding to the uncertainties for the year ahead.
Reinsurers’ ability to maintain strong combined ratios and profitability in 2024 was largely due to favourable pricing, improved terms and conditions, and a strategic reduction in exposure to less profitable sectors.
Although the global insured losses from natural disasters in 2024 were significant, reinsurers have continued to increase reinsurance rates and adjust terms to mitigate the impact of such events.
The industry’s performance in managing large losses like the Los Angeles wildfires in early 2025 demonstrates its resilience, with major players such as Munich Re and Swiss Re projecting growth in net income for the year, despite these substantial claims.
Additionally, the higher interest rate environment has been beneficial for reinsurers, allowing them to reinvest maturing assets into higher-yielding fixed-income securities, which boosted investment income by 15.1% year-on-year.
Morningstar DBRS also noted that, while US tariffs have raised costs for personal lines insurers, potentially impacting reinsurance profitability, the strong capital positions and pricing adjustments within the sector should help mitigate these pressures moving forward.
Looking ahead to 2025, Morningstar DBRS expects that global P&C reinsurers will face a more challenging operating environment, with the potential for sustained market volatility and geopolitical risks.
However, the firm remains cautiously optimistic, expecting the sector to navigate these headwinds effectively, thanks to its robust financial foundation and prudent risk management strategies.
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