Berenberg analysts have indicated that the 2025 reinsurance market softening differs from previous cycles in pace, discipline, starting point, and structural trends, potentially creating a more sustainable, risk-responsive environment—assuming no major loss shocks or shifts in behaviour.
“With reinsurance pricing retreating from the peak of 2024, many are haunted by memories of the soft phase of the previous cycle in 2012–17,” the analysts noted in a new report.
However, Berenberg argues that the 2025 softening is unfolding far more gradually, with stronger discipline and less capital-driven exuberance than in the last cycle.
“This should lead to a more sustainable, risk-responsive environment unless future loss shocks or behavioural shifts trigger a sharper change,” the analysts said.
Capacity and alternative capital
The report emphasised that market capacity remains ample, exceeding growing demand for cover. Alternative capital—including catastrophe bonds, sidecars, insurance-linked securities, collateralised reinsurance, and other structures—is also expected to remain at record levels.
“In terms of alternative capital, one theme remains consistent: it has become an increasingly important component of the overall property catastrophe reinsurance limit, particularly as US cedants see value in diversified sources of capital,” Berenberg noted.
The firm highlighted a potential influx of alternative capital as a key risk for the sector, warning it could undermine the pricing discipline of traditional reinsurers and trigger a new cycle in which participants compromise on pricing or loosen terms to pursue growth, with pressure likely to filter down to primary insurers.
“Nevertheless, the bulk of increased capacity still comes from incumbent reinsurers. This means overall terms and conditions are likely to remain firm, which is positive for sector profitability,” the analysts added.
Property catastrophe trends
The report also highlighted that property catastrophe remains the largest—and arguably most profitable—segment of the property and casualty (P&C) reinsurance market. Pricing in this area is falling, but from a very high starting point following the recent hardening of the market.
Berenberg emphasised that this decline mainly affects non-loss-impacted areas and represents only one part of the P&C market.
“The dynamics in casualty, specialty, and other P&C reinsurance segments provide some offset to the falling property catastrophe pricing,” the report said.
The analysts noted that for large, diversified reinsurers, overall pricing declines for entire books have been smaller than the estimated drops in property catastrophe alone.
Looking ahead to 2026, when property catastrophe pricing is expected to soften further, the big reinsurers are likely to be less affected due to the diversified nature of their portfolios.
“This means that, with a continued focus on margins and cost control, they can sustain attractive, albeit moderating, returns on equity,” the report concluded.