Reinsurance renewals

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While the April 1st reinsurance renewal is a smaller affair for property catastrophe accounts in the United States, broker Gallagher Re reports a wide-range of pricing outcomes, dependent on loss experience, with risk-adjusted rates on-line falling as much as 15% for loss free accounts, or rising as much as 15% for catastrophe loss hit.

“In a relatively light renewal period, nationwide account dynamics were broadly a continuation of the themes witnessed at the 1.1.2025 renewals,” Gallagher Re explained.

Adding that, “Reinsurers were highly focused on the impact of the January Californian wildfires, with buyers focused on differentiating both approach to the peril / geography and the outcomes from the event(s).”

However, impacted renewals were small in number and outcomes at the April reinsurance renewal for US cedants were highly dependent on loss experience and also program size.

Catastrophe loss free accounts property catastrophe reinsurance rates on-line came in with -5% to -15% reductions, on a risk-adjusted basis, Gallagher Re reports.

But, catastrophe loss hit US accounts saw property cat rates ranging from flat to +15%.

Risk loss free property reinsurance treaties renewed from flat to -5%, while risk loss hit property renewals saw rates-on-line ranging from +5% to as much as +20%, Gallagher Re said.

Which drives home the wide-range of outcomes and the influence of losses on property and property catastrophe reinsurance appetites and pricing at this time.

Despite the wildfires in January, Gallagher Re noted that capacity for US property catastrophe risks remained ample at the April 1st 2025 renewals.

Buyers took advantage of the increased capital supply to hold their retention levels constant, and push price reductions at the top end of their towers, typically the most competitive layers.

Due to increased capacity for property risks, Gallagher Re said there was increased demand for aggregate covers at the renewals with more placements seen as well.

“Several carriers sought to bolster existing aggregate programs, while others looked to establish new programs. That said, these aggregate protections continued to be pitched at the capital preservation, not earnings protection level,” Gallagher Re explained.

Read all of our reinsurance renewals news and analysis.

US property cat renewals see wide range of pricing outcomes at April 1st: Gallagher Re was published by: www.Artemis.bm
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Howden Re has reported that risk-adjusted catastrophe excess-of-loss (XoL) reinsurance rates-on-line for Japan saw reductions of 10-15% at the April 1st 2025 reinsurance renewals, as pricing “eased from a high base” and sellers sought to protect or grow positions at the renewal amidst higher competition and greater supply.

Risk-adjusted rate reductions in Asia-Pacific (APAC), combined with varied specialty renewal outcomes, reflects “hard market softening” at the Japan-focused April renewals, according to the reinsurance broker’s latest analysis.

With many property catastrophe reinsurance treaties having experienced relatively loss free outcomes for the last contract year, a continuation of January’s softening trend had been largely anticipated for the April renewals, as we reported.

“There were 10-15% risk-adjusted reductions on catastrophe excess-of-loss programmes, whilst global specialty and direct and facultative reinsurance placements varied by class,” the broker added.

The broker also revealed that both Japanese wind and earthquake XoL pricing adjusted from a high base at the April renewals, following consecutive years of market-driven and post-loss hardening, which began in 2018 and 2019 following the impacts of typhoons Jebi, Hagibis, Trami, and Faxai.

You can see Howden Re’s updated rate-on-line index chart for Japanese catastrophe excess-of-loss reinsurance contracts below:

“The natural catastrophe loss landscape in Japan and the Asia-Pacific region in 2024 was subdued relative to previous years, contributing to moderation at renewals,” Howden Re explained.

“The most significant losses of the last 18 months have been the Noto earthquake in January 2024, the Taiwan Hualien earthquake in April and Typhoon Yagi in September.”

Additionally, there had been some debate across the industry surrounding the potential impact of the January 2025 California wildfires on the Japanese April 1 renewals, however, Howden Re notes that the event, while impactful to reinsurer operating performance, did not “meaningfully constrain supply at 1 April.”

Overall, for Japanese catastrophe XoL programmes, less limit was purchased at the lower end of programmes with some buyers of coverage seeking additional top-layer reinsurance limit to address specific risk concerns, Howden Re continued.

The broker also noted, on average, ceding commissions for proportional quake cover increased by approximately two percentage points, signalling improved terms for cedants, as per-risk commissions varied by programme performance.

However, despite rate reductions of up to 15%, Howden Re says that “Japan remains an attractive market for reinsurers due to its high volume, relatively uncorrelated risk and deep pool of underwriting expertise backed by experience and exposure data.”

Andy Souter, Head of Asia Pacific, Howden Re International, commented: “This renewal is, on balance, a welcome reprieve for buyers in Japan and throughout Asia-Pacific on the back of an extended period of significant rate increases. With the recent easing in pricing and stable renewals, it’s a good time for cedents to secure more favourable terms and address specific risk concerns.”

Further in Howden Re’s analysis, the broker highlighted how the price moderation witnessed in most classes of business at the April renewals was facilitated by rising levels of dedicated reinsurance capital and strong insurance-linked securities (ILS) inflows, while also noting that capital levels now exceed their previous peak.

“This increase has been bolstered by record catastrophe bond issuance, which has continued in earnest during the first quarter of this year. Whilst reinsurers have reported healthy earnings and strong book value growth, it is becoming clear that future gains will increasingly depend on strategic innovation, rather than pricing momentum alone,” the broker added.

You can see Howden Re’s estimates for reinsurance and ILS sector capital levels in the chart below, which shows the significant growth seen in recent years:

David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re, commented: “At this stage of the pricing cycle, profitable growth increasingly requires a greater focus on product development, underwriting strategies and capital management.

“In order to navigate this market phase, comprehensive, integrated capabilities spanning treaty, facultative, MGAs, strategic advisory and capital markets, Howden Re is uniquely positioned to support cedents and reinsurers as they navigate this next critical phase of the cycle.”

Howden Re’s April renewal report also revealed mixed outcomes at April 1st for the global specialty reinsurance sector, primarily driven by ongoing uncertainty around war-related losses and macro volatility.

The broker explained that aviation reinsurance risk-adjusted pricing was largely flat at April 1st, showing a slight hardening compared to the 3.5% year-on-year decline seen at the January renewals earlier this year.

Moving over to the marine and energy space, Howden Re states that the downstream losses experienced in 2024 had little impact on programmes at April 1st, although the Baltimore bridge collapse remained in focus, due to the incident taking place within days of last year’s renewal and was therefore largely unaccounted for.

Although wildfire exposures were widely discussed, Howden Re noted that within the marine and energy space, specie was the main focus.

Switching attention over to terror, reinsurance rates reduced further amid softening on the direct side of the market.

“Consistent event definitions continued to provide stability in an otherwise evolving market. New capacity is simultaneously seeking entry through the MGA channel on both the insurance and reinsurance side, as observed in previous renewal cycles,” Howden Re explained.

On the other hand, the direct & facultative (D&F) market “continues to show resilience with strong demand for excess-of-loss capacity despite early 2025 loss activity,” says Howden Re.

The broker explained that reinsurers demonstrated greater pricing discipline at April 1st, compared to January 1st, particularly in response to California wildfire exposures which were largely retained by cedents.

Chris Medlock, Director, Global Specialty Treaty, said: “The April renewal reflected a broad range of outcomes across specialty and D&F lines. Whilst pricing softened in some areas, reinsurers remained selective and disciplined. Capacity was available but placement success depended on structure, exposure and underlying risk quality.”

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Japanese property cat rates down by as much as 15% at April 1: Howden Re was published by: www.Artemis.bm
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The April 1st 2025 reinsurance renewals are said to have seen a continuation of the gradual softening trend experienced at the start of the year, with reinsurance capital providers displaying strong appetites for growth still, but sources suggesting the overall outcome has remained disciplined.

While there have been some double-digit rate decreases seen, particularly in Japan and for higher-layers of towers, the general feeling is one of markets remaining focused on achieving adequate risk-adjusted returns for deploying capital to April renewal opportunities, as pricing comes off cyclical highs.

With many property catastrophe reinsurance treaties having experienced relatively loss free outcomes for the last contract year, a continuation of January’s softening trend had been largely anticipated.

Speaking with brokers and market participants in the last week, the outcome looks set to be one where many treaties have priced down, on a risk-adjusted basis, but that some larger cedants buying bigger reinsurance towers have also been taking the opportunity to leverage their financial strength to manage renewal costs, particularly in Japan.

Sources in the collateralized market and at insurance-linked securities (ILS) funds told us that they have been satisfied with the  April 1st opportunities they have sourced, while also noting a more competitive marketplace and strong appetites from reinsurers that have in some cases made ILS funds be more selective.

As well as reinsurers exhibiting strong appetites for growth at this renewals, which is no surprise given high capital levels and the fact pricing remains robust even with the softening seen, there are also said to have been some additional renewal participants, with some markets returning with a desire to grow into regions that were renewing at April 1.

One of the drivers for that is an impression that some regions renewing at April 1st have experienced strong growth in premium volumes, expanding the available opportunity set. But overall demand for protection across the April renewal has been relatively stable it seems, with additional purchases at some levels in reinsurance towers offset by stronger or larger cedants managing their costs through increased retentions and restructuring of towers.

On a risk-adjusted basis many renewals have come in softer it appears, but this is still only seen as a gradual continuation of recent renewal trends, despite the more competitive marketplace and in some cases growing number of reinsurance panel participants.

Brokers told us that there has been ample capacity to close renewals for April 1st and that their clients, the reinsurance buyers, are largely very satisfied with the favourable outcome.

The broader range of market participants being seen has also included some ILS players who, we’re told, have had some additional capacity to deploy and found opportunities attractive enough to meet their return targets.

Fully-collateralized limit remains less evident at April 1st, compared to other major renewals, given buyers often have a preference for rated paper. There is collateralized ILS deployment into April renewals, but it’s often based on long-term relationships with ILS managers and has never expanded that rapidly.

But, we understand fronted ILS capacity continues to be a participant that is growing in some cases, with some ILS managers said to have have accessed business from new regions and counterparties this year.

Japanese renewals have seen a competitive market environment this year, with softening largely seen, especially for the clients that have been able to demonstrate the best performance, most disciplined growth and where enhanced data granularity has been provided.

As a result, renewals are seen as risk-adjusted down by single digits and close to double-digits, for the majority, or into double-digits for top-performing cedants and larger catastrophe excess-of-loss towers, especially at higher-layers.

Reflecting the discipline still being seen, we’re told that the performance of an underlying treaty has been a key in April renewal outcomes, with markets pushing back on much lower rates in some areas, while reductions have been highest for cedants that can demonstrate their performance and provide enhanced portfolio data to assist reinsurance markets in their pricing.

But, perhaps making the outcome a little less clear, Japan renewals saw some larger buyers opting to manage the costs of their reinsurance purchases by retaining more risk against their backdrop of strong results and robust financials. Some have also been keen to buy more cover higher-up as a result of this trend, we are told.

Another major April 1 renewal market is India, where there were flatter risk-adjusted outcomes for many, but some softening seen, again for the best performing cedants. Here there has also been some demand increase it appears, although this is on the back of strong premium volume growth, we understand.

The Philippine market is thought to have also experienced a softening market for reinsurance at the renewals, although with some greater differentiation seen. Other parts of Asia are said to have experienced similar outcomes.

On the all-important terms and conditions, sources said the majority remain relatively unchanged, aside from adjustments where retentions have been adjusted to account for growth, or financial strength, often at the behest of the cedant itself, another sign of cost management in a still harder reinsurance market price environment.

Rates-on-line remain higher than where they were five years ago, even with the continuation of the January softening trend at April 1st, but we understand markets did push-back on early attempts to push for greater reductions this year, seemingly keen not to see the rate environment return to the levels seen around 2017.

Property catastrophe reinsurance rates-on-line had fallen by 7.2% at January 1st, according to broker Guy Carpenter’s regional indices.

Guy Carpenter’s APAC property catastrophe reinsurance rate-on-line Index was still up by 32% after the January renewals, since the market bottomed out in 2018 for this region.

When this index is updated to incorporate the April 1st outcomes, it seems likely the 2025 figure will fall a little further given the sentiment we’re hearing from the market.

There are some reinsurance renewals in the United States at April 1st and here we’re told that again, the outcome is seen as similar to January, however with more differentiation evident dependent on loss experience and with the recent California wildfires being factored in.

We understand there has been some demand increase in the US, while there has also been a little more retrocession buying and that this has experienced competitive markets as well.

In the coming days we expect to get more colour as broker reports on the April renewals come out, so stay tuned for additional insights.

Read all of our reinsurance renewals news and analysis.

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Equity analysts from investment bank J.P. Morgan came away from a recent visit to companies in the London insurance and reinsurance market with the impression that underwriters feel there is plenty of headroom left in the higher attachment points still installed across the sector, despite inflationary influences on losses.

“We came away from the tour with the feeling that the market is still in a good place; rates might be starting to weaken but they remain at highly adequate levels with the potential for strong ROEs for at least the next couple of years,” the analysts said.

While pricing trends are slowing across reinsurance, the J.P. Morgan analyst team note that they remain at “very healthy levels”, saying that while reinsurance softened through 2024 “the picture remains positive overall.”

“While there was a softening in price, it was considered that terms and conditions remained robust and attachment points were still at attractive levels,” the analysts reported.

Saying, “We had been slightly concerned about whether the material improvement in attachment points had been eaten away by inflation but we came away reassured that there is still plenty of headroom before the increase in retentions disappears.”

As a result, the London market insurance and reinsurance constituents that J.P. Morgan’s analyst team met with are largely confident that attractive underwriting opportunities exist.

“The view was almost universal that given the rate adequacy of pricing, there were likely to still be opportunities to grow and expand portfolios in 2025,” the analyst team explained.

The analysts highlighted in their report, that some attachment points do get adjusted for inflation, which tends to result in further upwards movement given the general inflationary trajectory seen around the world.

This resulted in attachments being “broadly flat in nominal terms” at the 1/1 reinsurance renewals and the majority are still at healthy levels, despite any inflationary influences.

The outlook for April 1st reinsurance renewals in Japan and South Korea had always been for a continuation of January’s softening trend.

It seems that in some cases the Japanese rate softening has been perhaps slightly faster than January, with some layers of towers seeing rate decreases in the double-digits, but overall we’re told the perception is that attachments have largely held again and some have been adjusted for inflation.

J.P. Morgan’s analysts said that the sentiment in London during their recent visit was that the recent wildfires might dampen price softening at the US renewals at the mid-year.

As rate-on-line stagnates, or softens, it’s going to be incredibly important for underwriters to take into account the effects of inflation on exposure and therefore ensure attachments are being kept at sufficient levels.

It would be very easy to allow for the effective attachment points to come down, as a lever for sustaining more rate per unit of risk in property catastrophe reinsurance renewals.

But the market has been there before, in the last softening cycle through the early to mid 2010’s, when there was little control of attachments and terms or conditions that in some cases caused meaningful increases in the probability that reinsurance layers attached.

While there may be plenty of headroom in attachment points at this stage and the market has appeared disciplined on this front, it’s important that other terms and conditions are not weakened to the degree that attachment risk rises unduly, while underwriters and insurance-linked securities (ILS) managers also need to keep a grip on inflation.

So many factors go into deriving a probability of attachment, for a reinsurance layer or an instrument such as a catastrophe bond. Inflation can undermine attachments if it’s not properly measured, considered and factored in.

But it’s also key to capture all forms of inflation, through the exposure base but also in the economy and how each can affect claims quantum, development and follow-on costs that can drive claims higher such as rebuilding.

While headroom still exists at this time, there’s no guarantee it will remain in a year or two’s time if the market becomes increasingly aggressive and competitive at renewals, or falls back into its old habit of placing the importance of securing volumes higher than sustaining profitability.

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Insured losses from the Los Angeles wildfires, which are currently estimated between $35-$50 billion, could support property catastrophe pricing heading into the mid-year reinsurance renewals, according to Goldman Sachs, however, analysts still expect mid-year rate trends to remain broadly in line with the January 2025 renewals.

Analysts highlight that the big four reinsurers: Munich Re, Swiss Re, Hannover Re, and SCOR, have already absorbed between 24% and 42% of their full-year natural catastrophe budgets due to the first-quarter wildfire losses.

“It remains very early to fully assess the impact on the mid-year renewals, however, the scale of the losses could suggest some upward pressure, although we are still of the view that mid-year renewals will be broadly consistent with what we have seen in January,” Goldman Sachs said.

Despite the severity of the California wildfire losses, Goldman Sachs maintains that the property and casualty (P&C) reinsurance market is in a post-peak margin cycle, following years of rate increases. This was reflected in the January 2025 renewals, where risk-adjusted pricing declined by 0%-2%, across Goldman Sachs’ coverage.

Notably, SCOR’s pricing remained flat, benefiting from lower retrocession costs, while Hannover Re saw a 2.1% decline.

These trends, combined with strong reinsurer returns, increased capital availability, and rising frequency loss activity for primary insurers, contributed to the first overall rate decline in nearly a decade.

While the Los Angeles wildfire losses may help limit further rate declines, Goldman Sachs remains cautious on any significant upward pricing movement at the mid-year renewals.

Analysts suggest that despite the large industry losses, overall reinsurance pricing will likely remain broadly consistent with January trends.

However, this could change if further catastrophe events were to strain budgets and capital availability across the market in the coming months.

As the mid-year renewals approach, market participants will closely monitor how capital levels and loss experience evolve, particularly given the uncertainty surrounding wildfire-related claims and broader catastrophe activity in the months ahead.

LA wildfires may support mid-year rate expectations for property cat: Goldman Sachs was published by: www.Artemis.bm
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Following a mixed pricing environment at the January 1st, 2025, reinsurance renewals, analysts at Moody’s anticipate property catastrophe reinsurance pricing to stabilise somewhat at the upcoming US mid-year renewals, driven by the impacts of Hurricanes Helene and Milton, and the more recent California wildfires.

In a new report, Moody’s noted that several key reinsurance brokers and European carriers have provided updates on their experience at the January 1st renewals, which is when typically between 40% and 60% of a global reinsurer’s portfolio is renewed, including much of the European business.

Among the big four European reinsurers, all except Munich Re, which saw a decline due to underwriting actions, reported premium growth at the renewals, as firms sought to deploy capital in a “still-attractive pricing environment,” albeit softer than a year earlier at the 1/1 2024 renewals.

Moody’s said: “Pricing across the portfolios of these European reinsurers was generally flat, ranging from a -2.1% decrease reported by Hannover Re to a 2.8% overall increase reported by Swiss Re. For its nonproportional business, SCOR reported the first pricing decease (-0.8%) since the January 2017 renewals.”

However, as reported by reinsurance broker Guy Carpenter, the US property catastrophe reinsurance segment witnessed an overall rate decline of 6.2% at the January renewals, which was the first decrease seen since the January 2017 renewal period.

Moody’s added: “Generally, pricing was largely stable in working layers – the lower levels of reinsurance used for more frequent and smaller claims.

“However, pricing was lower at the top end of reinsurance programs where there was plenty of capacity available for coverage of less frequent and larger claims, for which pricing remains attractive on a risk-adjusted basis.”

Shifting attention now to the mid-year reinsurance renewals, which particularly focuses on the US, the country has witnessed some heavy nat cat loss activity throughout the last several months.

Moody’s commented: “The upcoming midyear 2025 reinsurance renewals, which focus on the US, will be influenced by large US catastrophe loss events over the past year, particularly Hurricanes Helene and Milton and the Los Angeles wildfires, which are likely to provide support to reinsurance pricing for US exposures.”

Concluding: “Because many renewing US accounts have experienced losses from Hurricanes Helene and Milton and the recent wildfires in California, we think it is likely that US property catastrophe reinsurance pricing will stabilize, supported by the potential for significant price increases for accounts that have had sizeable losses over the past year.”

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Over the last few years, there has been a significant shift in sentiment among mainstream media and politicians, who cite the cost of reinsurance coverage as a key driver of the escalating cost of property insurance in the United States and nowhere has this been more apparent than in Florida.

The cost of reinsurance has been rising, as reinsurers and third-party capital providers, including ILS fund managers, seek to get paid adequately for the natural catastrophe exposure they are assuming, having been badly impacted by catastrophe and weather losses over repeated years.

Reinsurance has become an easy target for those looking to identify a driver of rising property insurance rates for consumers, especially given how fast and far the market has hardened over the last two years.

As an international financial market dealing in billions of dollars and with offshore centers of expertise, unfortunately reinsurance also fits a narrative for those who would prefer to shift the focus of blame for problems in the US property insurance market offshore, as well.

Which means it has become a contentious issue in political circles, especially in the US states that have been most affected by natural catastrophes and severe weather.

As ever, Florida is one of those states in focus and it seems that not a week goes by without mainstream press citing the cost of reinsurance as one of the issues keeping property insurance prices high for policyholders in the state.

Of course, pinning the blame for high property insurance costs on carriers’ expenditure on reinsurance protection overlooks all of the other drivers, many of which have been issues since long before this hard market came along.

Aside from the losses and the frequency claims that had been passed onto reinsurers, before the sector reset its attachments higher and reduced aggregate coverage, there have also been significant inflationary factors that have driven exposure values sky-high, as well as the excess and amplified cost of claims being driven by litigation and an industry that burgeoned with a focus on working to inflate the quantum of property claims.

None of this is unique to Florida either. It’s just a lot of this became more accentuated as it was professionalised there, while litigation and fraudulent claims have been something quite unique to behold in the Sunshine State.

Property insurance rates were bemoaned as problematic and too high in Florida well before 2017, at which time the reinsurance market was incredibly soft compared to the state of the market today.

The situation in Florida is also accentuated by the fact some of the domestic market insurance carriers have historically been relatively thinly capitalised, compared to nationwide players and so rising reinsurance costs have hurt them much more, while rising attachments have also proven problematic to their business models.

Which drove the state’s legislative to introduce more state-backed reinsurance support, which elevated the issue much higher and drove greater media awareness as well.

So, reinsurance as a topic, has been making its way up the political and media agenda and in the last year hit the state Governor’s budget, as Ron DeSantis set funds aside to pay for a study into reinsurance market cycles.

Earlier this year, Governor Ron DeSantis signed his budget for fiscal year 2024-2025, dubbed ‘Focus on Florida’s Future’.

There are a raft of insurance and risk mitigation measures within the budget, with some $237 million set aside for budget support of residential home mitigation programs and additional oversight of the property insurance market in Florida.

Within that, a small line item allocates $475,000 for contracting reinsurance industry experts to evaluate the impact of reinsurance cycles on property insurance rates.

There is no line item, that we can see, designed to pay for analysis of other factors driving property insurance rates in the state.

The property insurance market in Florida has been stabilising, with the effects of legislative reforms undertaken in recent years clearly one reason for this. While carriers capital positions have also improved, helped by a lower level of catastrophe and attritional losses last year.

This is also helping to improve conditions for buying reinsurance for carriers in the state, as seen at recent renewals.

But the fact remains, it is unfair to blame reinsurance markets for Florida’s high property insurance prices, or indeed for any other US state.

That has much more to do with the levels of exposure, inflation, values-at-risk, losses and all the aforementioned challenges with litigation, claims amplification and even outright fraud that has been seen after major losses struck the state.

We must not forget the fact Florida is ground-zero for exposure values to hurricane risk and while building codes and practices have improved, it remains true that any medium to major hurricane hitting the state can cause billions of dollars in losses for insurers and reinsurers.

At which point the reinsurance market always demonstrates its worth, as without it Florida’s insurance market would surely need to be fully-subsidised by the state government and its taxpayers.

Understanding the effect of reinsurance cycles on the rates property insurers charge in Florida is, of course, worth some effort.

Reinsurance rates go up. So too property insurance rates are likely to rise. But this has nothing to do with the true cost of doing business there, given the rapidly rising exposure and increasing values of property in the way of hurricanes, or other natural events.

The state might do better to analyse the effects of Florida specific idiosyncrasies, in the legal, adjusting, construction and repair marketplaces, as well as how those drove insurance rates higher over the last two decades.

While another worthwhile venture might be in exploring ways to buy reinsurance more efficiently, or how innovative risk transfer such as parametric triggers might be able to play a role and create different, perhaps better, economics for carriers in their interactions with reinsurers.

But understanding reinsurance market cycles and the influence they have on primary insurance rates may not lead to the kinds of learnings that can make much of a difference in the first place.

Supply and demand side factors, such as capital availability and risk appetite, are often driven by global factors, as well as local. Alongside which, there is a need for risk commensurate rates to be paid for both insurance and reinsurance. Subsidising that is not an industry concern, but the industry can provide solutions that might help add efficiency through pooling of risk and leverage of efficient sources of risk capital.

This market has itself been trying to understand reinsurance cycles for decades and in recent history many extremely well-qualified participants thought the reinsurance cycle was dead. That proved not to be the case, at least not in the way anyone thought.

The reinsurance cycle is alive and kicking and we’ve been trying to second-guess it for years.

We wish DeSantis and his team luck and hope they’ll share the findings from their chosen consultants.

I’m sure many reinsurers and ILS funds that deploy billions in capital to support Florida’s property insurance marketplace and the state’s inhabitants would welcome that too.

Florida Governor DeSantis wants to understand reinsurance cycles was published by: www.Artemis.bm
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Florida’s Citizens Property Insurance Corporation, the state’s insurer of last resort, is aiming to purchase $2.94 billion of new traditional reinsurance and catastrophe bonds for the 2025 hurricane season, which would take its total risk transfer to $4.54 billion this year.

Florida Citizens still has $1.6 billion of catastrophe bonds outstanding to provide protection through the 2025 hurricane season.

There is $1.1 billion of aggregate reinsurance limit available from the Everglades Re II Ltd. (Series 2024-1) cat bond that Florida Citizens sponsored in 2024, which will run through both the 2025 and 2026 wind seasons for the insurer.

In addition, Citizens still has $500 million of industry-loss based reinsurance from its Lightning Re Ltd. (Series 2023-1) cat bond that it sponsored in 2023 and which will provide coverage through the next hurricane season only, maturing early next year.

The cat bond program has provided the insurer with added certainty from its multi-year protection, on top of which it will now venture into the market to secure additional reinsurance or cat bonds up to the targeted $4.54 billion of limit.

To secure the necessary risk transfer and reinsurance protection for 2025, Florida Citizens said it is budgeting for approximately $650 million of premiums.

For 2024, the insurer had budgeted $700 million initially, compared to a projection of $695.2 million for for 2023.

The decline in premium ceded that is being budgeted for comes with the reduction in exposure Florida Citizens has experienced, as its depopulation program has taken greater effect in the last year.

Because of this reduced level of exposure, the 1-in-100 year PML is estimated at around $12.86 billion as of the end of 2024, compared to an over $17 billion projection it had for that figure in late 2023.

Recall that, Florida Citizens had reported its policy count as falling below 1 million by the end of November 2024. That decline has continued, with the figure dropping to 847,571 policies by the end of February 2025 and so the exposure-base falling commensurately.

Florida Citizens staff as a result propose buying total risk transfer of $4.54 billion, with the $1.6 billion of in-force catastrophe bond protection and $2.94 billion of new private risk transfer, made up of both traditional reinsurance and catastrophe bonds.

Some of the traditional reinsurance may also be from collateralized sources, as it’s typical that ILS funds participate in these layers as well.

In fact, at its 2024 renewal Florida Citizens secured almost $1.3 billion of protection that came from insurance-linked securities (ILS) and collateralized markets participation in its traditional reinsurance tower.

The 2025 risk transfer tower is expected to feature a traditional reinsurance sliver layer that sits alongside and works in tandem with the mandatory coverage provided by the Florida Hurricane Catastrophe Fund (FHCF) amounting to $394 million.

FHCF coverage is projected to be $3.548 billion in size, down on the $5.02 billion utilised for 2024, again due to the reduction in exposure.

Above that will sit a layer featuring the $1.6 billion of in-force catastrophe bonds and roughly $2.55 billion of new reinsurance and cat bonds procured for 2025, which will all be annual aggregate in nature.

You can see the proposed 2025 risk transfer tower for Florida Citizens below:

Beneath the private market risk transfer the surplus has been eroded compared to last year, effectively meaning reinsurance cover could attach from a projected $2.547 billion of losses in 2025.

At its 2024 reinsurance renewal, the Florida Citizens tower had $3.154 billion of surplus sitting in the bottom layer.

If Florida Citizens is successful in placing the targeted $2.94 billion of new reinsurance and cat bonds, giving it $4.54 billion of private market risk transfer, it says that it would expose all of its surplus and have a potential Citizens policyholder surcharge of $559 million for a 1-in-100-year event in 2025.

Citizens staff are now engaging with brokers, advisors and market participants to design, structure and price its reinsurance and catastrophe bond placements for 2025.

It’s worth remembering though, that Florida Citizens had targeted $5.5 billion of reinsurance and risk transfer in advance of the 2024 hurricane season, but only ended up buying just under $3.6 billion as it found pricing too high to maximise its protection last year.

Citizens explained that its proposed risk transfer tower for 2025, “is structured to provide liquidity by allowing Citizens to obtain reinsurance recoveries in advance of the payment of claims after a triggering event while reducing or eliminating the probabilities of assessments and preserving surplus for multiple events and/or subsequent seasons.”

Given the attractive execution seen in the catastrophe bond market for recent deal sponsors, it’s anticipated that Florida Citizens could come to market with another large new issuance in the coming weeks.

Florida Citizens targets $2.94bn of new reinsurance and cat bonds for 2025 was published by: www.Artemis.bm
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Third-party capital in the reinsurance market reached record highs in 2024, as broker Guy Carpenter, alongside rating agency AM Best estimated that it reached a substantial $107 billion at year-end, however, a key driver of the increase is the continued growth of the insurance-linked securities (ILS) market, which is the major component of third-party capital across reinsurance.

AM Best recently hosted a webinar which featured notable figures across the reinsurance industry, who discussed their reactions to the 1/1 renewals, as well as what they expect to see happen across the sector in 2025.

During the webinar, Carlos Wong-Fupuy, senior director, AM Best, highlighted third-party capital’s record performance in 2024, and then focused attention towards the role that ILS plays towards reshaping reinsurance capacity and pricing dynamics.

“I think that if ten years ago we were talking about ILS being a significant competitor to traditional capital, these days they are more in a converging role and working together,” said Wong-Fupuy.

He continued: “We see a lot of this increase on ILS capacity is actually from affiliated ILS funds, and a number of large-rated balance sheets actually have a ILS platform, which means that companies are working in such a way that they’re offering is sometimes actually contingent to having ILS capacity where they can reallocate risks depending on infrastructure appetite.”

Moreover, a recent report from AM Best highlighted how underlying ILS capital expanded throughout 2024 due to a large quantity of investors reinvesting their earnings across the market, which ultimately further expanded deployable ILS capacity.

In addition, Wong-Fupuy also commented on what role the hardening property reinsurance market plays towards shaping investor confidence going into 2025.

“I think that with the investors, especially on the ILS side, we have seen this reinvestment of returns. So, let’s remember, this is a segment that in the last few years is producing double digit returns, as close or in excess of 20%. Even with all the issues that we have been discussing, we are projecting something around probably around 15% or 17%, for the next couple of years,” he said.

“I mentioned earlier the risk premium that investors are assigning to that, so they are not expecting this to last for too long. Having said that we have a much higher interest rate environment as well.”

Wong-Fupuy also emphasized the need for a balanced approach to deploying capital and managing investor expectations.

“So, on the one hand, I think that the high returns that the segment is showing are achievable, but we have a cause of opportunity, which means that from an investor’s point of view, there are probably other lower risk alternatives which show the strong returns as well.”

ILS and reinsurance increasingly working together: Wong-Fupuy, AM Best was published by: www.Artemis.bm
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Paul Gregory, Chief Underwriting Officer (CUO) of insurance and reinsurance firm Lancashire Holdings Limited, has revealed that the company wrote a smaller retro book at the January 1st 2025 reinsurance renewals, which according to the CUO, resulted in a marginally better outcome for the organisation.

It’s worth noting that Lancashire is primarily a buyer of retrocession, rather than a seller.

Speaking during Lancashire’s full-year 2024 earnings call, the CUO explained that the company cut its inwards retro writings at the January renewals, as market conditions were “reasonably competitive”.

“We did take the opportunity to cut our retro book back. There was more rating pressure in that market, and as I said earlier, we’re a bigger buyer than seller so at the margin that’s better for us,” Gregory said.

“But, we took the opportunity to cut back some of our inwards exposure, given the rating environment.”

Also during the call, Gregory explained that Lancashire expects there to be less property catastrophe reinsurance rate softening than initially anticipated for the reminder of 2025, following the impacts of the wildfires in Southern California.

Industry losses for the January 2025 Los Angeles wildfires are currently centered around the $40 billion mark, however some companies have suggested the total loss could reach as high as $50 billion, while economic losses are expected to exceed $250 billion by some margin.

For Lancashire, the wildfires are estimated to drive net losses of between $145 million and $165 million, while the firm recently revealed that the event has eroded “a good portion” of its annual aggregate reinsurance coverage placed at the 1/1 2025 renewals.

Gregory commented on the potential impact of the fires on rating for the rest of 2025 for different classes and regions.

He said: “For property catastrophe reinsurance, we would expect there to be less rate softening than we originally anticipated. We would expect to see a flattening of rate in the US and more measured rate softening in other territories.”

“There are, of course, a number of territories still to renew through the year that are loss impacted, and these will see year on year rate increase. So, overall, the rating environment will now be more favorable than originally expected,” he added.

Outside of property cat reinsurance, Gregory explained that Lancashire does not foresee any significant change from the firm’s original rating outlook, other than if directly impacted by wildfires.

“What the California wildfires do is act as a reminder that our industry is always subject to large loss events. It is also a reminder of the value of our product. Usually, large loss events of this nature are a catalyst for future demand, and any increased demand for the product will only help further stabilise the rating environment,” commented Gregory.

Lancashire wrote less retro at 1/1 amid ‘reasonably competitive’ market conditions: CUO was published by: www.Artemis.bm
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