European demand for aggregate covers resurges as insurers seek frequency protection: Gallagher Re’s Dowlen

European cedants are showing renewed interest in aggregate catastrophe reinsurance coverage, as elevated retentions and heightened sensitivity to the potential impact of an increased frequency of events put pressure on underwriting earnings, according to Hamish Dowlen, Managing Director and Head of EMEA at Gallagher Re.

Speaking to Reinsurance News, Dowlen noted that many European insurers have materially increased their retentions since 2021, a shift that has heightened exposure to mid-sized and frequent loss events.

As a result, appetite has returned for aggregate structures that can cap volatility over the course of a year, rather than just protect against single events.

“In recent years, many European insurers have significantly increased their retentions compared to earlier periods,” Dowlen explained.

“While most are relatively comfortable with that on a single-event basis, we’re having more conversations with clients who say: if frequency hits a certain level, and they’re retaining those per-event losses multiple times a year, then they’re very interested in something that will cap that exposure.”

He added: “Traditionally, European cedants have purchased aggregate covers for frequency protection for many decades. But in recent years, many of those structures have fallen away—either because they became unsustainable or pricing was no longer acceptable.”

Dowlen said the market is becoming “a little more flexible” again.

“We’ve identified solutions that are placeable. Cedants are now looking at what their peers are doing and saying: ‘This could address my concern about earnings being hit by a high frequency of cat events.’”

When asked whether this renewed appetite is more pronounced in specific lines or regions within Europe, Dowlen responded: “There’s interest across all of Europe. Almost every country has multiple catastrophe perils affecting their portfolios. Even in a quiet year for windstorm or flood, you might still face frequency from other perils, that combination causes concern.”

“The German-speaking markets, Germany, Austria, and Switzerland, traditionally bought more aggregate cover than other parts of Europe, so they’ll be particularly engaged. But I wouldn’t restrict the interest to any one territory,” he continued.

“In terms of lines of business, all of property is in focus. While we’re mainly talking about nat cat, cedants are also looking to cover broader property exposures if possible.”

Looking ahead, Dowlen said reinsurers are adapting their approach to pricing and structuring aggregate risk in Europe.

“Reinsurers are increasingly focused on staying relevant to clients in Europe. There’s plenty of capacity, and many reinsurers want to be active in the region,” he said. “While they’ve consolidated their positions on core programs, they’re now asking: ‘What more can I do to address additional concerns and strengthen my client relationships?’”

He concluded: “It’s very much a client-by-client, opportunity-by-opportunity situation. That’s where we’ve played a role so far, helping clients shape aggregate covers that work for both parties and are sustainable over the long term.”

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