The growth outlook for mainland Chinese reinsurers is expected to remain "moderate" and in the mid-single digits in the near term, an S&P Global Ratings analyst said during an Oct. 30 webinar.
The slowing economy in mainland China could impact the primary insurance market, and this will likely extend to reinsurers, said Judy Chen, associate director for financial services ratings. Additionally, portfolio overhauls and tighter risk selection for new business could temper local reinsurers' growth appetite over the next two years.
Portfolio revamps and a more stringent review of their contracts' terms and conditions are expected to gradually alleviate reinsurers' underwriting pressures. However, the increasing frequency and severity of extreme weather events could pose a significant risk to reinsurers, potentially leading to greater underwriting volatility, Chen said.
Still, there will likely be increased demand for reinsurance — particularly for agriculture and natural catastrophe coverage — as the primary insurance market evolves, Chen said.
Reinsurers are also looking overseas to grow and diversify, capitalizing on the insurance needs of companies venturing outside mainland China. However, mainland Chinese reinsurers are expected to adopt a more cautious approach to overseas expansion over the next two years, in light of the past subdued underwriting performance of their overseas books, Chen said.
2025 pricing preview
Asia-Pacific reinsurers could see rate moderation similar to the global markets at the Jan. 1, 2025, reinsurance renewals, said Trupti Kulkarni, associate director for insurance ratings at S&P Global Ratings, noting that rated reinsurers seem to have adopted a "selective underwriting approach."
"We have seen that in the loss-making accounts, the rates have continued to harden and the terms and conditions continue to be a little tighter," Kulkarni said. "But when it comes to a little bit more profitable or manageable accounts, I think we have seen some more moderation."
The April renewals in Japan will likely follow trends at the Jan. 1 renewals, said Kentaro Mukoyama, associate director for financial services and international public finance ratings. However, Mukoyama warned that this could change in the coming months owing to potential catastrophe events such as snow.
In Taiwan, Serene Hsieh, director and lead analyst for financial services ratings at Taiwan Ratings Corp., has not observed a "concrete correlation" between the likelihood of reinsurance cost increases and the natural disaster events seen in 2024. And even if there is, Hsieh expects the magnitude to be "moderate and manageable." The Taiwan market continues to have adequate reinsurance capacity, Hsieh said.
On a global basis, "it looks like that we have seen the peak in terms of pricing," said Johannes Bender, director and lead analyst for insurance ratings at S&P Global Ratings. "In the [2024] renewals, we have already seen that selectively, depending on the region, depending on the line of business, prices have already come down a little bit."
For areas that saw big catastrophe losses, however, significant price declines are unlikely, Bender said.