Gallagher Re CEO on Cat Reinsurance Renewals: Lower-Layer & Aggregate Appetite Increases

The recent renewals in the property catastrophe reinsurance market have shown a rational softening, as reported by broker Gallagher Re. While prices decreased more than anticipated by many reinsurers, catastrophe loss-free property reinsurance treaties saw declines in most regions, with exceptions in areas like Europe that experienced significant catastrophe events in the past year.

In the US, property catastrophe rates-on-line were renewed flat to down 10%, while Australia and Korea also saw reductions in loss-free treaties. Despite these declines, the market remained stable, with catastrophe loss-hit reinsurance renewals actually increasing in some cases. For example, US rates-on-line rose up to 15% for impacted treaties.

Tom Wakefield, CEO of Gallagher Re, highlighted the trends in the January 2025 reinsurance renewals, noting pricing pressure in areas of growth and reduced risk-adjusted pricing overall. He mentioned that the US casualty market remains divided, with some seeking growth opportunities while others are cautious.

In terms of new capital entering the market, Wakefield mentioned that around US $1 billion in rated start-up capital was introduced for 2025, which he described as modest. Additionally, insurance-linked securities (ILS) from the capital markets continued to see strong supply, with fund managers raising more capital and attracting new investors.

The renewals this year brought about improved terms and conditions for clients, including more standardized provisions and enhancements in specific territories. The appetite for lower layers of property reinsurance towers and aggregate coverage also increased, as more reinsurers provided support for selected buyers on both structured and traditional bases.

While buyers explored catastrophe aggregate purchases for the first time in years due to improved conditions and increased market capacity, core program attachment points remained stable. Pricing dynamics in the catastrophe reinsurance market also showed improvements this year, with challenges seen in previous years smoothing out.

Looking ahead, Wakefield emphasized the importance of primary market trends in shaping the reinsurance market outlook for the next 12 to 24 months. Despite some challenges related to supply/demand dynamics, recent operating results indicate a significant repricing of risk in all major segments in recent years. Overall, the recent renewals reflect a period of stability and collaboration between reinsurers, brokers, and buyers, driven by a refinement in underwriting approaches and an increased focus on data quality and differentiation.