The Monte Carlo Rendezvous is pivotal for the global reinsurance industry, setting the scene and tone for upcoming renewals. RVS 2024 was no different with the event laying the groundwork for the renewals season staring on 1 January 2025. The key takeaway for Optalitix from this years' event is that, after two strong years in 2023 and 2024, the London Insurance Market is more attractive to external capital than it has been for some time, but that success has the potential to soften the market as competition increases.
Recent months have seen new capacity and several new market entrants. Convex, for instance, is increasing its premium capacity, and new syndicates are forming; including Awbury Syndicate 2025 and Fidelis Partnership Syndicate 3123. Lloyd’s CEO, John Neal, has backed the Corporation's ability to achieve $100bn GWP by2026.
Developments such as this and the strong performances of both Lloyd’s and the wider London Market in 2023 and into 2024 suggest sustained growth and corresponding interest for investors. But the additional capital and capacity have the potential to soften rates into 2025 and beyond.
Profitable years draw new entrants
The market has seen two strong years with a hardening of premium rates since the 2023 renewals following a difficult period of losses. In 2024, Lloyd’s stamp capacity rose to a record high of around £53 billion, with indications that three-quarters of syndicates are seeking to increase their capacity, and several targeting double-digit growth.
Against this background, the London Insurance Market has attracted more investment, with the new capacity aiming to capitalise on profitable conditions. However, this increased competition may lead to rate challenges as we approach January renewals.
The profitability of the past two years is undoubtedly an opportunity for growth, but its a hard market that differ from some previous cycles. Rather than a major single loss or catastrophic event, the current hardening has been the result of several years of accumulated losses, particularly from secondary perils. This slow-burn change means that while recent results have been strong, they have been accumulated without the impact of a large-scale catastrophe.
There is also growing concern over certain business lines, particularly US casualty, which have not performed as well as, for instance, property. While property classes have adequate rates, some areas of the casualty market continue to be challenging for underwriters. So, while the market conditions are strong, they are not immune to rapid changes. This may explain why investors, while entering, have not entered to the degree that we might have expected.
Structural discipline under scrutiny
While the current influx of capital is encouraging, some industry observers remain cautious. Investors have expressed concerns about whether the market can maintain the structural discipline that has been crucial to profitability over the last two years. The hard work done to stabilise rates and maintain adequate pricing may be tested if the market softens and competition increases.
Optalitix points out that Lloyd’s of London is better positioned to facilitate growth now than it has been in recent years. With the ambition to grow syndicates and capacity, the London Market is more open to new entrants than ever. While this is an opportunity for growth, the risk of new market players failing to maintain the discipline necessary to avoid notable rate reductions remains.
The January2025 renewal season will see reinsurers looking to address the need to maintain rate adequacy and accommodate increased capacity. Well-performing risks will bein high demand but other markets like US casualty market remain uncertain. A breakdown in pricing discipline could drive profitability challenges.
Inflation and claims frequency: a delicate balance
Some discussions at The Rendezvous focused on the issue of rising claims frequency, driven in part by inflationary pressures. With losses becoming more frequent, reinsurers must ensure that their pricing remains sustainable over the long term.
Although there appears to be consensus that property reinsurance rates will continue to rise, opinions on the scale of these increases differ. Many in the industry expect rate hikes to remain in line with inflation. Only a small proportion of respondents to the Monte Carlo Today survey supported significant increases above inflation, suggesting a relatively stable market outlook.
A focus on adequacy rather than aggressive rate hikes will help to support sustainability within the sector.
Opportunities and risks in 2025
Looking ahead to 2025, Optalitix sees both opportunity and risk for the market. New capacity and strong recent results, suggests the London Market is well placed for further growth. However, the pressures to expand must be balanced with caution. Rate adequacy will remain a critical focus, particularly in casualty lines, where competition could intensify and lead to downward pressure across the market as a whole.
For market participants, the key will be maintaining discipline in both underwriting and strong pricing control. However, the market’s growth potential could be short lived with any significant disruption—whether from catastrophic events, inflationary pressures, or a failure to maintain structural discipline—having the potential to quickly reverse recent gains.
Dani’s actuarial experience and passion are key. He is a strong advocate of innovation, optimism and communication, both within the team and for the clients. Dani’s ability and experience with data ensure that we always maximise value and efficiency for every project, enabling us to unlock hidden value for the clients business.
