Retention expectations broadly still hold true for reinsurers: Mowery, Guy Carpenter

In a recent Q&A session at the Guy Carpenter media briefing titled “A New Cadence,” Lara Mowery, Global Head of Distribution, shed light on the evolving landscape of the reinsurance industry, specifically highlighting how retention expectations continue to hold true for reinsurers.

“So, as we’re starting to see capacity rebounding in the property catastrophe space, our early indications in discussions with reinsurers is that those retention expectations broadly still hold true for reinsurers,” Mowery stated.

Reinsurers have moved away from aggregates and frequency losses throughout 2023 to offset rising losses from secondary perils, and Mowery’s comments suggest that this will remain the case, pointing to more losses being retained by primary insurers.

Mowery clarified that these expectations now serve as a baseline for reinsurers’ strategies in the reinsurance market. In response to the changes, certain reinsurers are exploring innovative solutions within the realm of retained risk that insurance companies are facing.

This indicates a growing interest among investors and reinsurers in developing tailored solutions to meet the demands of higher retentions.

This shift in risk retention has led insurance companies to adapt and adjust to a new normal. The reinsurers’ pursuit of higher retention levels has been accompanied by changes in the structure of reinsurance programs.

She emphasized that clients have made strategic tradeoffs when considering their renewal structures for 2023. These choices have involved decisions on how to compose insurance programs, including the possibility of taking on more quoted co-participations or refraining from buying additional limits.

“So, as those product conversations develop, there is some investor interest and there is some reinsurer focus on how you develop solutions underneath those newly higher retentions.”

Another significant development mentioned was the influx of capacity in the middle and upper layers of programs. This surge in capacity, when coupled with competitive pricing, has garnered substantial client interest, allowing programs to be more comprehensively filled out, she explained.

Mowery said that “as more capacity has come in for the middle programmes, the upper layers of programmes, there is an ability at the right price points to attract client interest to fill out some of those programs.”

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