Reinsurance companies have done well in recent years, exceeding their return on equity (ROE) targets, and they’ve brought some of this success to their January 2025 renewals, a season that analysts at Gallagher Re say was far more straightforward and orderly than usual. They also report fewer issues related to wordings, with many reinsurance clients enjoying modest rate reductions across many lines.
Flush with capital
“Reinsurers came to market flush with capital and keen to put it to good use, so reinsurance supply generally exceeded demand. In many cases, modest price reductions were secured by clients who could show that their exposures were backed up with solid data and well-evidenced views of risk,” the reinsurer stated in its recent podcast, Reinsurance Renewals: Demand in the Driving Seat.
The renewal, they continue, comes off the back of two years where insurers paid significantly higher risk-adjusted rates while also shouldering more losses related to natural catastrophes. Retentions, the level at which reinsurance kicks in to cover losses, rose dramatically in the past two years and did not change much in January.
Looking to grow
The season contrasts with 2023 renewals when there was less capital available and a reluctance on the part of reinsurers to take on certain risks. In late 2024, in the lead up to January 2025 renewals, they say reinsurers were all looking to grow.
“The 2025 renewal was a more deliberate, a more well-planned and executed plan renewal, so cedants were generally back in the driving seat. Many had spent time to differentiate themselves from peers, and this took form in the transparency of their portfolios, quantification of impact of underwriting changes, providing detailed information of claims evolution or on value of risk (and) around various perils or subsections within their book,” explains Gallagher Re’s global head of reinsurance carrier management, Ditte Deschars. “This really resonated with the reinsurers.”
