Strategic Imperatives for P&C Reinsurers in 2025
October 17, 2024
After an outstanding 2023 market result for reinsurers, 2024 promises to be equally strong assuming that early estimates for Milton are not too wide of the mark.
But the current market equilibrium feels fragile: traditional reinsurance capital is estimated to be up 10% in 2024; well-capitalised challengers are manoeuvring; some startups are lurking; and third party capital is steadily increasing. The outlook for 2025 is uncertain.
In this context, it is essential for leadership teams to use the flexibility offered by current business momentum to refresh their strategies (or parts of them) and invest in their businesses to set them up for the next market cycle. In this report we provide some guidance on strategic imperatives for reinsurance management teams.
In section 1 of this report we briefly reflect on 2023 market performance.
- We note that positive sentiment in the property market is offset by challenges in casualty and specialty.
- Our Reinsurance Market Model shows a sharp uptick in P&C underwriting profit in 2023, but also highlights that investments have delivered over four times more net income than P&C reinsurance underwriting over the last ten years.
- We observe that Price-to-Book ratios moved to five-year highs for many companies, especially those leaning into property catastrophe risk.
In section 2, we consider two challenges that P&C reinsurers need to navigate in 2025.
- We note that the combined Munich Re and Swiss Re P&C reinsurance market share has reduced from 45% to 37% in the last decade. A group of five ‘scale challengers’ (Hannover Re, RenaissanceRe, Everest Re, Arch Re, MAPFRE RE) have increased their share from 25% to 39%. Our analysis shows there is little evidence that scale drives performance in reinsurance, but influence matters. The larger players need to rethink what ‘leadership’ means in an increasingly congested market, and challengers have an opportunity to make bold moves in the next market cycle (like RenaissanceRe did with its acquisition of Validus Re in 2023). We also believe reinsurers need to avoid being stuck in the middle: neither too small to invest and lead, nor too big to be agile.
- We also highlight analysis that shows that real expense ratios (adjusting premiums for rate increases) are higher than reported expense ratios in 2022 (4.5% compared to 3.5%). Reinsurers need to transform their business models to enable scalability and manage cost as market conditions change.
In section 3, we consider four areas where reinsurers need to act in 2025.
- Making big strategic choices: Determining the role of P&C reinsurance, L&H reinsurance and Direct in the business model.
- Enhancing client strategy and operations to drive growth: Putting more structure into the coverage model to access risk in an increasingly competitive marketplace.
- Learning from asset management to gain the full benefit of portfolio management: Getting more comfortable with diversifying beta business and being able to write it efficiently.
- Transforming the operating model: Elevating operational strategy and change capability in the business to build a future-fit organisation that can scale efficiently.
About the authors
Chris Sandilands is a Partner at Oxbow Partners. He started his career at Munich Re where he was a D&O underwriter. He then moved into consulting, where he has spent 20 years advising (re)insurance management teams around the world on topics including strategy development, operating model redesign, governance optimisation, underwriting transformation and innovation. Chris lives in London and spends a lot of his time with clients in Bermuda and Continental Europe.
Christian Bieri is a Senior Advisor at Oxbow Partners. He has held senior underwriting and leadership roles at Swiss Re and Amlin Re (now MS Re) and was most recently CEO of Bernina Re, Credit Suisse’s ILS vehicle.
