The key challenge for both insurers and reinsurers as they set out to fulfil their growth aspirations will be to maintain underwriting discipline, Morningstar DBRS observed in a recent report.
Global insured natural catastrophe losses are said to have reached $80 billion in H1 2025, making it one of the costliest opening six-month periods on record for insurers.
Morningstar DBRS added, “This year, most of the H1 insured loss was caused by the wildfires that affected parts of Los Angeles County in January, causing the largest global insured loss from a wildfire.
“Wildfire risk has been on the rise over the last decade, much of it attributed to rising temperatures and drier conditions at a time when suburban sprawl is leading to more housing units situated within wildfire-prone regions.”
Still, the softening trend began in mid-2024 and has continued to accelerate, with commercial property insurance prices in Q2 2025 declining by 7% compared to year-ago levels.
Morningstar DBRS, citing Guy Carpenter’s Global Property Rate-on-Line Index, which tracks global property catastrophe reinsurance pricing, reported that the index declined by 8.1% in the first half of 2025.
The agency noted that ample reinsurance capital, both from traditional reinsurers and the continued growth of third-party capital, has kept property reinsurance prices suppressed since the start of the year and is likely to do so in the near term.
Morningstar DBRS continued, “As some of the largest reinsurers contend, third-party capital could prove unstable and might abruptly withdraw capacity in the aftermath of major catastrophic losses.
“This would most likely lead to sharp reinsurance rate corrections as witnessed most recently in 2023.
“Meanwhile, we expect that traditional reinsurance capital will continue to grow at a steady pace, supported by strong underwriting results, retained earnings, and solid investment returns.”
As mentioned, Morningstar DBRS highlighted that the key challenge for both insurers and reinsurers as they set out to fulfil their growth aspirations in the future will be to maintain underwriting discipline.
“To achieve this goal, we expect a clear price differentiation between loss-free and loss-affected programs,” the firm stated.
The agency concluded, “For instance, insurers exposed to regions affected by recent wildfires will likely face higher attachment points, lower aggregates, and stricter wordings. Higher reinsurance prices for loss-affected programs were already observed at 2025 renewals, and we expect the same in 2026. Loss-free portfolios should maintain or marginally improve terms.
“The same type of differentiation is expected to be passed on to insureds via primary insurers with higher price increases for regions heavily affected by natural catastrophes.
“Over the longer term, if worsening climate conditions continue to drive up claim costs, commercial property insurance prices may resume their upward trajectory seen in the few years prior to 2024.”
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