Reinsurer Appetite Fuels Excess Property Catastrophe Capacity at January 1

Non-loss-impacted property catastrophe renewals saw risk-adjusted rate reductions of 5 to 15 percent at January 1, Guy Carpenter reported in collaboration with AM Best. The reductions were driven by regional pricing variances, attachment point details, and differing reinsurer views on price adequacy.

Reinsurer appetite surged, with capacity increasing by 10 to 15 percent, outpacing the estimated 5 percent rise in demand. These dynamics reflect reinsurers' strong positioning, supported by the following.

• A profitable 2024, with average returns on equity reaching 17.3 percent
• A 6.9 percent increase in total dedicated reinsurance capital to $607 billion
• Continued discipline around attachment points and pricing
• Cedent actions to enhance portfolio profitability through rate adjustments, limit management, and disciplined risk selection

Dean Klisura, president and CEO of Guy Carpenter, said, "Renewal outcomes at year-end reflect reinsurers' positive property experience over the last 2 years and casualty portfolios that are well positioned for future profitability."

Attachment points were pivotal, with 2024 catastrophe losses nearing $130 billion globally. The reinsured share of these losses dropped to 14 percent from the pre-2023 average of 20 percent. Supplemental purchases like frequency protection and retention buydown options emerged as critical tools for cedent capital and volatility management.

Loss-impacted layers saw varying outcomes, with risk-adjusted rate increases from flat to 30 percent across the United States, Europe, and Canada. Meanwhile, the 144A catastrophe bond market remained active, closing the year with 67 transactions totaling $17 billion in limits placed.

Casualty reinsurance renewals proved challenging. Proportional structures generally held steady or saw slight decreases in ceding commissions, while excess liability and umbrella placements experienced treaty term pressures. Enhanced data transparency from cedents allowed reinsurers to better assess portfolio risk.

The cyber-reinsurance market also demonstrated innovation, with buyers exploring solutions such as pro rata structures, event excess of loss, and aggregate stop loss programs.