Past the pricing peak: Four forces shaping insurance in 2025
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- 2025 marks the beginning of a new cycle for the (re)insurance industry
- In an uncertain, complex world, the demand for risk transfer has never been higher
- For the first time since 2020, rates are falling – the industry must innovate to grow
2025 heralds a new cycle for the global (re)insurance industry.
For the first time in a decade, an elevated risk landscape, healthy supply levels and broad-based rate reductions have converged.
The significance is clear and compelling: the industry has a fresh opportunity to enhance its relevance and grow by expanding coverage into new areas.
Below we lay out the four forces that will shape the insurance industry in 2025. We explore each of these supertrends in more detail in our 1.1 report, Past the pricing peak, an annual data-driven analysis of the risk landscape, macroeconomics and (re)insurance market conditions.
Read the key takeaways and download the full report
Risky business
Businesses start the year confronted by a complex risk landscape. The economic outlook is uncertain, clouded by geopolitical instability and trade uncertainty. Natural catastrophes are intensifying and striking more often. Civil unrest is flaring up, fuelled by political grievances and economic strain. Meanwhile, cyber- attacks and systemic events continue to plague IT systems, exposing a wide gap between the resilience of businesses with adequate protection and the many without. With costs running into the billions of dollars, it’s no surprise that demand for risk transfer has never been higher.
Healthy supply
The (re)insurance industry is better placed than ever to transfer risk away from businesses, government and people. Insurers and reinsurers are earning returns five to 15 percentage points above their cost of capital, with reinsurers achieving levels of economic value not seen in well over a decade. For the reinsurance sector, improved profitability and growth have shored up the capital base, with dedicated reinsurance capital estimated to be at a record high of $463 billion at year-end 2024, up 10 per cent year-on-year.
Rate reductions
For the first time since 2020, the cost of cover is falling. This welcome trend has brought broad-based, risk-adjusted rate reductions, with global commercial insurance down ~1 per cent in the first nine months of 2024. On the reinsurance side, 1 January 2025 renewals saw reductions across global property cat (-8 per cent), property retrocession (-13.5 per cent), global D&F (-12.5 per cent) and London Market casualty (-2 per cent).
Innovation rules
To thrive in this new era, insurers must look for new income streams to drive growth. Amid global volatility, businesses are crying out for more protection in everything from cyber to renewables. Greater emphasis on innovation, on collaboration and on listening to the needs of the end customer will mean a win-win-win for clients, society, and insurance companies alike.