Pricing in the Asia-Pacific (APAC) reinsurance market is expected to remain soft in 2025, which reflects increased capacity and ample retrocession, Fitch Ratings’ Asian Reinsurance Monitor: 2025.
The result is increased competition in an environment that raises underpricing risks amid complex catastrophe and emerging risk exposures, potentially weighing on margins and earnings.
“Fitch has revised its outlook for the global reinsurance sector to ‘deteriorating’ for 2026 from ‘neutral’ for 2025. This change reflects our expectation that underlying operational and business conditions are likely to worsen in 2026, although they will remain overall favourable for reinsurers worldwide,” the credit rating agency noted in a report ahead of RVS 2025.
APAC’s earnings and market stability have benefited from relatively benign catastrophe losses in early 2025. Which, alongside strong performance experienced in recent years, has also contributed to risk-adjusted rate reductions in recent renewals.
Despite this, concerns remain, as emerging risks, especially those related to climate change and extreme weather, have the potential to lead to volatile loss development and greater uncertainty in risk modelling.
The region’s reinsurers’ growing capacity have sustained adequate capacity to meet cedant needs, based on selected statistics, the report highlighted.
“This has been supported by consistent underwriting profits and stable investment income. The orderly retrocession market has further enhanced reinsurers’ flexibility to refine portfolio strategies and manage risk effectively,” Fitch added.
Moreover, in Fitch’s view, reinsurers have started to refocus their risk appetites, prompted by increased capacity and heightened competition, which have also led them to concentrate on more profitable segments.
“Some reinsurers may loosen underwriting criteria to maintain market share. Others are taking a more disciplined approach by reassessing catastrophe exposures and strengthening risk management to maintain underwriting profitability while limiting loss risk,” Fitch said.
Climate volatility and evolving risks have also encouraged reinsurers in the APAC region to explore alternative risk transfer options such as catastrophe bonds.
This innovation in risk strategies has been supported by governments initiatives in Hong Kong and China, which aim to promote the ILS market.
“Climate volatility and changing risks require continued innovation in risk transfer strategies, despite strong capitalisation,” Fitch concluded.
The post APAC reinsurance market to remain soft: Fitch Ratings appeared first on ReinsuranceNe.ws.