Retention levels to remain stable despite demand: MAPFRE RE’s Meyerhoff

Amid growing demand for reinsurance capacity, clients have shown interest in buying lower down to go back to past retention levels, MAPFRE RE’s Mark Meyerhoff has observed, yet this is not something he sees happening, instead he anticipates stable retention levels at the upcoming renewals.

Around the Baden-Baden conference, MAPFRE RE’s Chief Regional Officer Europe told Reinsurance News: “I’ve seen a growing demand for additional reinsurance capacity. Of course, on top, the major European countries are buying a lot more capacity, substantially more in some cases.

“At the same time, I’ve observed there has also been a demand, that I have not seen in the two renewals before, for the lower ends of the programs. This means clients are interested to buy further down, to go back to the retention levels they had before.

“This can be done via sub layers; this can be done by a frequency protection program or by a structured solution. In general, I do not see a very pronounced risk appetite from the reinsurance industry for it to go down with the retentions again, I don’t see it.”

It would be highly improbable that what mentioned above will happen, Meyerhoff highlighted. Therefore, the only likely outcome that he anticipates is the maintenance of consistent retention levels.

He also noted that retention levels will become under pressure in the future as losses from secondary perils keep intensifying.

“When you have a look at the loss burden over the last years, coming from severe convective storms, secondary perils in Europe in this case, the increase has been exponential,” Meyerhoff stated.

He continued: “I don’t see this stopping. Why should it stop? Water temperature is not going to go down on the contrary, this is going to increase further. Therefore, we have to sit together with our clients, with the cedents, because they are in a difficult situation and we have to see what can be done, what is acceptable for both parties.

“Probably for some perils we might see higher retention numbers in 2025. We are most likely already going to see that in these renewals. Also, we’ll probably have different retention levels according to the peril. This is something we see already in Japan. This would work for example as a different retention for wind, and different retention level for earthquake. A model that could be copied for Europe.”

Speaking on market conditions for reinsurance, Meyerhoff noted that there is pressure on the rates and a softening in parts of the market already – another takeaway he got from this year’s RVS in September.

This, combined with the recent floods in Europe and the two hurricanes in the US – Helene and Milton – will help to keep the discipline ahead of January 1, according to Meyerhoff.

He stated: “Probably the three events that have occurred after Monte Carlo, will at minimum help out to keep the discipline. At least in Europe, regionally speaking, with the floods that have taken place, this will need to lead to a price increases.

“It’s true, things have been done in the last few years, prices have gone up, and that we have increased some retention levels. However, after this loss, I expect that prices are going to increase further. So, on a global basis, discipline will continue, and on a regional basis I believe we are going to see positive price adjustments.”

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