Optimism is growing among those seeking aggregate retrocession coverage, as James Boyce, CEO of Global Specialties at Guy Carpenter, notes a positive market shift. This improvement is characterized by a surge in available capacity, an influx of new reinsurers, and an emerging oversupply. Such developments are expected to translate into reduced retention rates and a broader array of choices for policyholders, indicating a more buyer-friendly environment.
During a recent Guy Carpenter briefing, preceding the 2025 Monte Carlo Rendez-Vous, Boyce highlighted the continued profitability of property retrocession for reinsurers, even in the face of recent rate reductions and substantial catastrophe losses. He specifically detailed the strong performance of retro occurrence, estimating a five-year loss ratio of 46% and an eight-year ratio of 58%, which has supported a billion-dollar increase in capacity for 2025. While aggregate excess of loss has historically been more constrained than occurrence, Boyce observed a notable increase in its oversupply, suggesting an evolving landscape for this segment. He anticipates a heightened demand for aggregate excess of loss in 2026, especially given the recent Los Angeles wildfires which underscored its protective value. Clients who had this coverage in 2025 experienced significantly lower retentions for subsequent catastrophe losses. Should the remainder of the year see minimal major losses, increased retained earnings are likely to further bolster market supply, creating even more advantageous conditions for buyers.
Adding to the discussion, David Duffy, President of Global Clients at Guy Carpenter, provided insights into the current and prospective outlook for property reinsurance. Despite the challenging start to the year, marked by the severe Los Angeles wildfires, the property reinsurance market demonstrated resilience throughout 2025. Duffy emphasized its consistent approach to coverage and its responsiveness to client loss experiences and pricing considerations. He noted that while catastrophe retentions in 2025 generally aligned with 2024 levels in monetary terms, the impacts of inflation and rising property values increased the likelihood of triggering most catastrophe programs. Risk-adjusted pricing has softened in 2025, particularly in less risky layers, where reinsurers and insurance-linked securities (ILS) investors continue to exhibit a strong appetite for risk. Duffy concluded that the growth in property reinsurance capacity in 2025 was primarily fueled by profitable underwriting in 2024, supplemented by new capital from newly rated balance sheet reinsurers and the sustained growth of ILS mandates, driven by robust returns on catastrophe coverage. This overall expansion in reinsurance capacity outpaced client demand for catastrophe limits, resulting in consistent oversubscription of catastrophe programs across all regions in 2025.
The current trends in the reinsurance market underscore the dynamic nature of risk management and the importance of adaptability. As capacity expands and new players enter the field, the industry demonstrates its capacity for growth and innovation. This evolution is a testament to the collective effort to provide robust protection against unforeseen events, ultimately contributing to a more secure and stable financial future for all stakeholders.
