Reinsurers see opportunities amid market moderation: Gallagher Re CEO

Reinsurers view the current market as an attractive space, even after some moderation in terms and conditions. However, they face ongoing pressure to deliver strong results amid a renewal season marked by variability and diverse outcomes, according to Tom Wakefield, Chief Executive Officer (CEO) of Gallagher Re, the reinsurance arm of the global brokerage.

In a recent interview with Reinsurance News, the executive shared insights into the current market landscape and the firm’s strategic approach during the January 2025 renewals.

Discussing some of the significant trends Gallagher Re observed at 1.1, Wakefield observed that 2025 was “definitely going to be the year of differentiation for clients” which manifested itself in various ways.

He continued, “It has not been a one-size-fits-all renewal, and there’s been a wide range of outcomes, depending on the narrative and the alignment of data that we’ve been able to provide to reinsurers.

“You’ll see quite some risk-adjusted rate change on property. There’s a ton already out there in the market. Per risk remains a challenge, and demand is up a bit on the cat side, so about 5% growth of limit in that space.

“I think the most important thing to focus on is that the averages in our 1st View report don’t tell the whole story. If you look at the top end of cat layers, for example, they were introduced in a high-inflation capacity-constrained market back in 2022/2023. They were initially priced way above the pricing curve to attract the scarcity of capacity that existed at that point in time.

“These layers have been repriced, and that’s leading to the percentage reductions that you’re seeing grab some of the headlines. Generally, the lower down the programs, the less repricing has taken place. We are seeing a new appetite for aggregate and structured solutions supporting lower-level cat protection.”

As per Wakefield, while there has been some price remediation, Gallagher still sees buyers with an appetite to minimise volatility.

Buyers are reportedly looking to include enhanced coverage where there is available. For example, in certain regions, the firm said it witnessed prepaid reinstatements coming back onto slips, which were largely kind of taken off in previous years.

Wakefield added, “We can identify some general trends, but there’s significant nuance. While the cat market garners attention as a key indicator of the industry’s success, this is due to the tangible results it delivers for reinsurers rather than the total premium derived from it.

“Casualty has a lot of premium flowing through the reinsurance market and has thus been a key focus. Still, it’s cat result which can make the difference between very high returns and very low returns because reinsurers take a disproportionate amount of the exposure. While we completely understand that cat is at the top of everyone’s mind, casualty has actually been a far more challenging renewal for our clients.”

With dedicated reinsurer capital expanding in 2024, Reinsurance News then asked Wakefield what he expects to be the main focus for reinsurers in 2025/2026.

“If you think about where the market is at, the non-life primary insurance market has improved pricing significantly over the last few years, and reinsurers have benefited from that,” he said.

Wakefield went on to say, “They’ve also benefited from higher reinsurance prices, tighter terms, and adjusted cat attachment points.

“This had shielded reinsurers from the 2024 elevated nat cat losses. Globally, reinsurers are on track for combined ratios of near or below 90%. The Big Four European reinsurers are now operating around a 281% solvency ratio, versus their target of 200%. Share price performance has been good, and results have been good. We do think that ILS capacity will remain strong and continue to grow.

“There were attractive returns for ILS capital of around 20% in 2024, so we do expect that these strong returns will continue to drive targeted investment in the sector.

“Most areas are still attractive for reinsurers to grow in, albeit that is now putting some pressure on pricing terms and conditions. While the averages vary by segment, client, region, and loss impact, we expect that to continue to put pressure on terms and conditions as we go through 2025.”

Turning to comment on the biggest opportunities and challenges for the reinsurance market in 2025, Wakefield said, “I think reinsurers see the market today, even after some amelioration in terms and conditions, as a good place to be, but they are under pressure to continue to deliver consistent results over time.

“Our job is to represent our client’s data and insights and go and get them the best possible terms and conditions in the markets. We’re putting pressure on reinsurers to provide broader coverage, to attach lower where required, and to move back towards some aggregate products.

“We’re looking at all sorts of parametric-related coverages and more structured deals. I think we’re a fair way off reinsurers feeling like this is not a market they want to grow in, and giving back money to investors is always more difficult than it sounds.

“The pressure will continue to increase given there will not be much more growth in cat limits. We’re also seeing no increase in limit deployed in the specialty space, except for renewables, which is a market that continues to grow, but we’re not seeing new demand coming from anywhere other than the ILS space.

Wakefield concluded, “As such, reinsurers have increased appetite, increased capital, and limited macro market growth to operate in.

“I think at midyear, we’ll see further amelioration on terms and conditions, but do I think we’re going to end up back where we were in 2021/2022? No, not at this stage.

“It’s our job to make sure that a fair proportion of the losses are shared with reinsurers. And the last two or three years, we haven’t seen that. That could be because of the way the losses have fallen. It could be because of the way that reinsurers have adjusted deductibles. It is probably a combination of both.”

Read more on Gallagher Re’s 1st View Report here, which explores current market conditions at the key 1.1 2025 renewal date.

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