Rates-on-line for retro cat XoL fall 10-20% at 1.1 2025, says Howden

According to Howden’s 1.1 2025 renewals report, risk-adjusted retrocession catastrophe XoL rates-on-line fell by between 10% and 20% at the January reinsurance renewals, as a result of trapped capital stemming from Hurricane Milton being negligible and supply dynamics increasingly favouring buyers as additional capacity entered the market.

The broker explained that the combination of it being another profitable year and a largely clean year for the retrocession market in 2024 ultimately led to pressure price and signings at January 1, 2025.

However, Howden notes that despite both Helene and Milton making landfall in Florida as major hurricanes in quick succession, there were minimal retrocession recoveries after Helene hit a largely unpopulated region of the state, whilst Milton avoided a worst-case scenario when it tracked just south of Tampa Bay.

Additionally, structural changes that were imposed in 2023 also insulated retrocessionaires from these levels of loss, the report added.

Meanwhile, the broker stated that supply was sufficient to complete placements across all products at this year’s renewals.

“Strong competition further up programmes resulted in significant risk-adjusted reductions. Capacity for low-attaching occurrence layers and aggregate covers remained limited, although reinsurers were more supportive relative to last year at certain price levels. Terms and conditions were generally stable,” Howden added.

Furthermore, the broker explained that coverage and attachment points were “important inputs” towards purchase decisions at this year’s January renewals, as reinsurers were “more willing to give on price and maintain the same attachment points, region and peril coverage.”

On the other hand, a combination of extreme weather, vendor model changes and lingering inflationary pressures,  supported demand at the January 1, renewals, however some buyers reportedly assumed more net exposure off the back of improved profitability.

Interestingly, Howden noted that buyers are expected to explore additional protections in 2025 to enhance their purchases through buy-downs or aggregate products.

The broker also added that the majority of traditional and alternative markets maintained commitments through the renewal, with deployments focused on mid-to-top layers of programmes, which clearly reflects the strong preference for remote risks.

“They also leveraged their position by supporting across multiple placements. New markets struggled to deploy capital but pushed terms and conditions early in the renewal cycle,” notes the broker.

“Capital providers continue to explore allocation opportunities in the retrocession space but are looking for a sustained run of good performance before adding to existing allocations.”

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