The 2025 reinsurance market is set for significant changes that could impact business insurance premiums and coverage terms across property and casualty lines. Reinsurers, insurers and brokers are forecasting fluctuations that would directly affect your risk management strategy. To stay ahead of rising costs and evolving coverage challenges, staying informed and taking proactive steps to protect your business in the year ahead is crucial.

Predictions for the 2025 Reinsurance Market

Property Reinsurance: A Softer Market but Continued Risks

A recent Fitch Ratings survey discovered that over half of market participants expect reinsurance prices to increase in January 2025. However, Fitch also predicts the current pricing cycle has peaked, suggesting a softer market due to abundant capital. While property reinsurance trends show prices, are beginning to ease, catastrophic loss risks remain significant. To address property-related challenges:

• Review property insurance limits. With property-catastrophe (CAT) loss trends still rising, ensure your property insurance policy has adequate limits and up-to-date valuations to cover potential risks.
• Update risk mitigation strategies. Secondary peril events (e.g., wildfires, floods) are increasingly frequent. Invest in proactive strategies to reduce the chance of claims.
• Leverage competitive pricing. Work with your broker to negotiate favorable pricing on property policies in a softening reinsurance market.

Casualty Reinsurance: Expect Double-Digit Price Increases

While property rates are easing, casualty reinsurance price increases are expected to see double-digit price increases in 2025. Reinsurers are particularly concerned about social inflation, rising litigation and adverse loss development, especially in workers' compensation and commercial auto lines. To help mitigate the impacts:

• Address workers’ compensation costs. Social inflation is driving up claims. Implement strong return-to-work programs and workplace safety measures to help reduce claims.
• Monitor legal trends. Stay informed on litigation trends, especially in sectors prone to high-dollar settlements (e.g., health care, transportation). Ensure your liability coverage can handle these risks.
• Prepare for higher deductibles. Reinsurers may increase deductibles or reduce coverage limits on casualty policies. Consider adjusting your reserves or exploring alternative coverage options.

Impact of Hurricanes Helene & Milton: An Example of Rising Primary Market Losses

Although the Fitch survey was conducted before Hurricanes Helene and Milton, early estimates suggest the primary insurance market will absorb most of the losses due to higher reinsurance attachment points. (These are the thresholds a business must reach in losses before insurance coverage begins). This trend highlights the need for businesses to reassess their risk management practices in response to evolving natural disaster risks. To better protect your business:

• Conduct a disaster preparedness review. Learn from recent natural disasters to strengthen your organization’s disaster response and recovery plan.
• Evaluate insurance attachment points. As attachment points rise, determine if your business can manage higher retention levels or if additional coverage is needed.
• Consider catastrophe bonds. These financial tools can offer extra protection against large-scale disasters.

Casualty Market Capacity: Tightening Across the Board

Casualty reinsurers are limiting capacity and tightening underwriting terms due to rising loss costs and adverse developments in commercial auto and liability lines. Quota-share commissions are also expected to decline, potentially restricting coverage options for high-risk sectors. Here’s how to prepare:

• Diversify your insurance program. In a tightening market, explore multiple coverage solutions (e.g., layering policies across multiple insurers) to spread risk and improve capacity.
• Reevaluate deductibles and retentions. With shrinking limits, your company may need to take on more internal risk. Consider adjusting your deductibles or increasing self-insured retentions to offset rising premium costs.

Strategies to Navigate 2025 Reinsurance Challenges

• Proactively manage property risks. Despite potential price easing, continue investing in disaster preparedness and risk mitigation. Regularly review property limits to ensure they reflect current valuations.
• Prepare for higher casualty premiums. Anticipate double-digit increases in casualty lines. Minimize the impact by enhancing workplace safety measures and monitoring legal trends that could impact claim costs.
• Strengthen disaster response plans. Recent events, like Hurricanes Helene and Milton, highlight the devastating impact of natural disasters. Ensure your business has a solid response and recovery plan.
• Work closely with your brokers. In a tightening market, your insurance advisor can be invaluable in securing better terms or exploring alternative financial tools like catastrophe bonds.
• Prepare for higher deductibles. As insurers shift more risk back to policyholders, be ready to adjust reserves and adapt your risk management strategies accordingly.

We’re Here to Help You Navigate the Reinsurance Market

By staying informed and taking a proactive approach, business leaders can better navigate the evolving insurance market in 2025. The key is to stay agile, work closely with your broker and regularly assess your coverage needs as market conditions change. Taking these steps can help protect your business from cost surges, ensuring necessary coverage without undue financial strain. Connect with a member of our team for additional information on how you can protect your organization.