More retro capital expected, will impact cost & supply-demand dynamic: GC

According to reinsurance broker Guy Carpenter’s Global Specialties division, there is an expectation more non-marine retrocessional capital and capacity comes to market through the end of year, which could impact supply-demand dynamics and cost of coverage.

Commenting on property retrocession market conditions today around the Monte Carlo RVS, Guy Carpenter said that Q2 2024 saw “a significant increase in demand for peak peril retrocession (retro) coverage and cat on direct and facultative (D&F) limit.”

While, “Demand for retro XoL coverage increased following the April 1 renewals, driven by appetite from buyers at January 1 for peak peril retro top- up limit and new buyers looking to re-enter the market.”

The market remains narrow for lower-level retro coverage, “but brokers are keen to get more reinsurers back into that space,” Guy Carpenter’s team said.

Commenting on the quota share market, GC said results have been strong.

“Results in quota share have been strong, so more markets are willing to deploy capacity on a quota share basis. However, in the retro space, there is still more demand than supply for quota share capacity,” the reinsurance broker explained.

The rest of the hurricane season will influence the end of year renewals, but already there is an expectation of more capital being available to support retrocession deals at the January 2025 renewals.

“There is currently sufficient capital in the market to meet demand, but more is likely to be deployed, which will impact overall cost and supply dynamics,” Guy Carpenter said.

Adding, “Attachment points are expected to be as prominent in renewal discussions as price.”

“Clients buying a material amount of capacity should be assessing as many pools of capital as they can – traditional reinsurers, ILS reinsurers for occurrence and aggregate, as well as quota share and cat bonds or looking at index products,” explained John Fletcher, CEO, Bermuda.

“As with previous renewals, Guy Carpenter advocates accessing multiple pools of risk capital. As we approach the renewals, we anticipate that clients will have a greater choice of who they want to trade with,” added Richard Morgan, Head of Non-Marine Specialties.