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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.

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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.

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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.”

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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.

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If the mid-year 2025 reinsurance renewals see relatively flat pricing, commentary from the recent AIFA conference by analysts at Autonomous Research suggests this could be a catalyst for more capital coming off the sidelines and into the insurance-linked securities (ILS) market.

Reporting on what they heard from ILS investment specialists and reinsurance firms at the annual AIFA conference held in Florida recently, the equity analyst team at Autonomous said third-party capital is still interested, but largely seems to remain on the sidelines for now.

“The significant progress reinsurers made over the last two years in strategically de-risking their books and improving underwriting results and ROEs has clearly piqued third-party capital interest in the space,” the analysts wrote.

Adding, “It remains a bit perplexing, then, as to why the market hasn’t yet seen a meaningful entrance of new capital.”

Alternative capital providers, such as private equity, have “purportedly not yet robustly jumped back into the deep end of the market,” the analysts heard from ILS investors and market participants at the event.

But, there are more favourable trends elsewhere, as in ILS there are more positive views on the typical investors such as pension funds who continue to find the asset class a good source of returns that are less correlated with other investment classes.

“That said, broader sentiment on third-parties re-entering the market appears to be warming,” the Autonomous team reported.

In fact, some investors said that a flat mid-year reinsurance renewal in 2025 could be just the catalyst needed to encourage more capital into the reinsurance and ILS market.

Autonomous explained, “Some investors hypothesized that flat pricing at the mid-year renewals may be the catalyst needed for capital to return as the reinsurance market has demonstrated the extended signs of sustainable profitability typically needed to get investors off the sidelines.”

But they added that, “We didn’t get the sense that pricing stability in June/July would open the alternative capital floodgates, but it could certainly turn the taps back on.”

Investors are certainly watching closely how the reinsurance market responds to recent loss activity such as the California wildfires and last year’s hurricanes, with many suggesting the renewals would be hoped to be disciplined and only flat to a little down, in terms of pricing, so continuing recent trends.

Of course the catastrophe bond market has been softening this year, in part due to weight of maturities and capital. So we could see a continuation of the trend for some bifurcation between higher-layer ILS capital and the mid-to working layers of reinsurance towers.

As we also reported on other commentary from the AIFA conference, equity analysts noted mixed views on the mid-year renewal outlook for property catastrophe reinsurance rates, but suggested that there are no signs of overly aggressive behaviour at this stage.

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Bermuda-based Lancashire Holdings Limited has reported that losses from the devastating Los Angeles wildfires have eroded “a good portion” of the annual deductible of the organisation’s aggregate reinsurance cover, but the company has plenty of limit available for the rest of the year, according to Chief Underwriting Officer (CUO) Paul Gregory.

In January, Lancashire announced estimated, aggregate net ultimate losses from the California wildfires to be between $145 million and $165 million.

Moreover, at the key January 1st, 2025, reinsurance renewals, Lancashire secured annual aggregate worldwide coverage for its property treaty and direct and facultative books.

Earlier today, during its full year 2024 earnings call, Lancashire explained that each qualifying event is subject to an occurrence layer with a per event deductible and limit, and as-if recoveries from that layer erode the annual aggregate deductible.

“Our California wildfire loss estimate erodes a good portion of the annual aggregate deductible, reducing it for subsequent events,” Lancashire explained.

Once the aggregate deductible has been fully eroded, additional losses are recovered from the annual aggregate reinsurance limit secured at the 1/1 renewals.

It’s important to note that this aggregate reinsurance structure provides coverage for Lancashire’s property insurance classes and property catastrophe treaty reinsurance, while other classes are not covered under the agreement.

During its full year 2024 earnings call, Lancashire confirmed that, at the renewal, the aggregate structure was extended to fully include all natural catastrophe perils.

As you can see from the image below provided by Lancashire, the Los Angeles wildfire losses have eroded more than 50% of the organisation’s annual aggregate deductible.

During the call, Gregory was questioned on the structure of the 2025 aggregate reinsurance cover, and confirmed that the structure is similar to last year.

Gregory explained: “We were able to get benefit of, obviously, some softening of rate. So, we took that benefit. We were also able to expand coverage for certain products, which was helpful.

“In terms of the limit, obviously, the wildfires erode an element of the limit in our reinsurance programme, but we have plenty of limit remaining available for the rest of the year.”

Furthermore, Lancashire didn’t reveal how close the annual aggregate limit is to attaching or how high the limit extends, but Gregory did provide some additional context.

“For illustrative purposes only, if we had an exact repeat of our 2024 natural catastrophe loss events, in addition to the Q1 wildfire loss, we would anticipate recoveries from the aggregate cover. We would also not be exhausting the full limit available,” commented Gregory.

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Following the annual AIFA conference held in Florida this week, equity analysts noted mixed views on the mid-year renewal outlook for property catastrophe reinsurance rates. Pricing in upper-layers of reinsurance towers is expected to see the greatest competition, but there are no signs of overly aggressive behaviour at this stage.

Analysts noted that supply and demand balanced out at the January renewals, resulting in flat to slightly down outcomes for many property catastrophe signings.

But, there are a number of factors to consider for the April 1 and mid-year June and July 1 renewals, with market participants having mixed opinions on how impactful the recent California wildfire losses will be on reinsurance capital’s demand for rate.

Across a range of equity analyst reports, still wildfire loss estimates are floating between $30 billion and $50 billion.

But some market participants at the AIFA conference believe that the industry-loss is moving more towards the upper-end of that range.

In fact, one analyst report stated a belief that the industry-loss could end up close to the $50 billion mark, with a chance that some reinsurers may need to raise their own ultimate loss estimates as a result.

Any creep higher in the Los Angeles wildfire losses could drive greater discipline at upcoming renewals, at least for US nationwide and multi-peril catastrophe reinsurance contracts it seems.

All important terms and conditions are deemed largely unchanged after the January renewal season and reinsurance market participants expressed a desire to see that stick through the renewals later in 2025.

But, reinsurance capital is building, not least in the insurance-linked securities (ILS) market where catastrophe bonds in particular have seen high levels of activity and investor interest.

This led analysts at J.P. Morgan to say, “This suggests an uptick in competition over time, although there are no signs of overly aggressive behavior currently.”

Some of the analysts see an almost repeat of January at the mid-year renewals, even after the wildfires, with flat to slightly down pricing, but still sustained terms. Although any further catastrophe or major loss activity through the months running up to June and July could adjust that view.

Goldman Sachs analyst team noted the variation in viewpoints over how pricing will develop in reinsurance this year.

“The prevailing view on this debate was that prices will remain flat to slightly down at 6/1 with reinsurers holding retentions steady. Others viewed the recent CAT events as more influential on near-term prices with the view that the level of losses and a near miss of Tampa in Q4 will encourage greater discipline,” the Goldman Sachs analyst team said.

But they also noted, “Agreement remains that reinsurance companies will continue to hold the line on retentions, and greater competition on pricing is expected in the higher layers of reinsurance towers.”

Pricing pressure for top and higher layers of property catastrophe reinsurance towers is almost assured, given how the catastrophe bond market has been executing on price in recent weeks.

The price of cat bond market catastrophe reinsurance has fallen year-on-year and by a more significant amount than was seen broadly at the January renewals. There is some variation, depending on cedent and specific perils, but the general trend is downwards as can be seen in our charts detailing the average risk spreads of cat bond issuance and the average multiple-at-market of cat bonds over time.

Catastrophe bonds are providing robust competition for those higher-layers and cedents have been responding well by sponsoring larger and more expansive deals in 2025, which suggests reinsurers will likely compete to secure the shares of higher layers that they desire to underwrite and retain.

However, some reinsurers may also look to the price execution in the cat bond market and see a distinct opportunity to share some of those higher layer risks and make use of any price differential that emerges between traditional and capital markets coverage, as there has been some bifurcation between the two so far this year.

Interestingly, analysts at Jefferies, after the AFIA conference, said that one of their takeaways is that “property reinsurance pricing is modestly improving following CA fires and demand is increasing.”

While J.P. Morgan’s analyst team also said that commentary about reinsurance at the event was particularly “upbeat” saying that “High losses from LA fires should help support demand and reinforce pricing discipline, at least in the near term.”

The KBW analyst team also reported on the AIFA event and said, “Reinsurance executives remain confident about expected property catastrophe reinsurance returns, as attachment points hold steady and small rate decreases only modestly reverse prior years’ more dramatic rate increases.”

Capital is seen as sufficient to support reinsurance demand, even after the wildfire losses, while KBW reported that one industry executive said “slightly tighter terms and conditions” are possible, especially on how catastrophe events can be treated as single or multiple losses, a direct response to the wildfires it seems.

TD Cowen analysts also highlighted an industry expectation that terms may tighten after the wildfires, saying, “The brunt of these California wildfires will likely be borne by reinsurers, as the majority of the losses fell on homeowners’ carriers, who are heavy users of reinsurance.

“This will likely stabilize reinsurance pricing, according to the panel. The expectation for April 1 reinsurance renewals is that demand will remain strong, but terms and conditions will likely tighten compared to those at Jan. 1.”

Analysts from Autonomous also attended the AIFA conference in Florida this week and said they came away believing that successful insurance and reinsurance underwriters will remain disciplined through 2025.

Reinsurers gave the Autonomous team the impression that there could be some stabilisation to reinsurance pricing trends at the mid-year renewals, while strategic appetites for property cat business would remain in focus.

The Autonomous team said, “From brokers to third-party capital investors, nearly everyone we met with noted that demand for property cat is still not fully met, especially as carriers begin to look to re-expand their reinsurance coverage. These dynamics along with meaningful primary retention of losses from Hurricanes Helene and Milton seem to be stabilizing property cat pricing expectations heading into the mid-year renewals.”

Pricing could be close to flat at both June and July reinsurance renewals that analyst team heard, with reinsurers still willing to grow their property catastrophe books while rates remain attractive.

Appetite for aggregate covers remains muted it seems, as well as for lower-layers, which should see those structures and levels of risk staying firmest, it appears.

Finally, analysts from Evercore ISI concurred with most of the reports, saying that they came away feeling that the reinsurer tone seemed more positive as they looked ahead to the mid-year renewals.

But, rightly, Evercore ISI’s analysts said on the reinsurers, “we think this is to be somewhat expected given their position and timing ahead of renewals.”

Reinsurers are clearly hoping for roughly flat to slightly down pricing at the June and July reinsurance renewals in 2025, pushing for an outcome no worse than that seen in January.

The wildfire losses and also the ramifications of hurricane season losses last year are seen as factors that can help to hold up rates. While the severe weather season in the United States through the spring could be another influence on the renewals.

But, while terms are expected to be in focus again and likely to be a key negotiating area, there is certainly an expectation that the renewal outcome will differ depending on where in the tower capital is being deployed to.

Lower-layers and aggregates are once again likely to have the strongest chances of firming.

But higher-layers are going to see the most abundant competition, with the catastrophe bond market likely a key driver of that.

Importantly, capital is not in shortage at all and likely to only keep building, unless there is some kind of impactful catastrophe, man-made, or economic loss event that affects the industry.

In fact, capital may prove to be abundant as we move through the next few months, so absent any further impacts to the industry and if the wildfire losses don’t creep higher, pressure on renewal pricing and terms may prove to be more forceful than the industry is hoping for.

It’s still very early, of course. But no doubt reinsurance underwriters will be looking to the catastrophe bond market as one source for price signals, as the important mid-year renewals approach.

Read all of our reinsurance renewals news and analysis.

Mixed views on property cat rates, terms still in focus, top-layers to be competitive: AIFA was published by: www.Artemis.bm
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Speaking during Hiscox’s full-year 2024 earnings call, Joanne Musselle, Group Chief Underwriting Officer (CUO), said the company made significant savings on its retrocession placement at the 1/1 renewals, then allocated some of those savings to support its recent $200 million Ocelot Re Ltd. (Series 2025-1) catastrophe bond.

Earlier this month, Hiscox Group successfully secured the targeted $200 million of retrocessional North American peak peril reinsurance protection from its Ocelot Re Ltd. (Series 2025-1) cat bond transaction, with one tranche of notes priced at the mid of initial guidance, while the second was priced at the low-end of reduced guidance.

You can read all about this Ocelot Re Ltd. (Series 2025-1) catastrophe bond from Hiscox and every other cat bond issuance in our extensive Artemis Deal Directory.

During the call, Musselle addressed the savings that Hiscox managed to make on its retrocession placement at 1/1, as well as the fact the company had reinstated its retrocession following the California wildfires.

“Whilst we’re a net beneficiary of reinsurance rates, we’re also a significant buyer of reinsurance, and our outwards team did a great job at 1/1 of placing our own program at substantial savings,” she explained.

“Our capital remains very, very strong. In terms of reinsurance, our London market program is intact and we reinstated our retro program. We bought some additional protection on a second loss basis, and also we placed a $200 million catastrophe bond out of our retro 1/1 savings.”

She continued: “We were already in the market because we saw substantial retro 1/1 savings across the reinsurance savings across our portfolio, and the cat bond market looked attractive.”

Musselle also noted that Hiscox is a heavy buyer of reinsurance across all of the organisation’s business lines, across property, casualty and specialty.

“Clearly we planned for our reinsurance spend, for our retro and our London market property reinsurance spend. We made a plan and our outwards team did a great job, and placed our program with substantial savings. Hence the cat bond that we were already in the market to utilise some of those savings,” she added.

Also during the call, Chief Executive Officer (CEO), Aki Hussain, discussed Hiscox’s dedicated insurance-linked securities (ILS) business, and said that it remains integral to the group.

“As part of our Re & ILS business, third-party capital management and our strategy to manage that, has been an integral part of the business model for many years and during the course of the year, we attracted $460 million dollars of new inflows into our ILS strategies, which have gone a long way to offset the planned capital return and we continue to broaden and deepen our quota share partnerships,” he explained.

“Not only is this strategy integral, it is a material contributor of earnings to our Re & ILS business and in the year, we recorded record fee income of $128 million dollars.”

Concluding: “In Re & ILS, we continue to deploy incremental capital into attractive market conditions.”

Hiscox ILS achieved a record level of third-party reinsurance capital-related fee income in 2024, driven by strong performance fees and substantial new inflows throughout the year. 

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UK government backed mutual terrorism reinsurance firm Pool Re has secured another increase in size to its retrocession program, lifting it by 15% from £2.4 billion to £2.75 billion at the latest renewal, while our sources suggest that a new vintage of the Baltic terrorism catastrophe bond is expected to add to this.
Pool Re placed its £2.75 billion retrocession programme for 2025 with more than 60 international reinsurers.

The renewal featured participation from Hannover Re and The Fidelis Partnership, among others, while the placement was brokered by Guy Carpenter.

Pool Re’s new retro program covers property damage resulting from acts of terrorism certified by the UK Government, covering both conventional and nuclear, biological, chemical and radiological (CBRN) attacks, as well as those from a limited cyber extension.

The retrocession program is structured as an aggregate excess of loss cover.

Our sister publication, Reinsurance News, reported in February that Pool Re was seeking more private market retrocession coverage when compared with previous years, following recent changes made to the company’s retrocession agreement with HM Treasury.

According to HM Treasury, the changes to the retro agreement will provide the opportunity for more of the financial risk arising from terrorism to be returned to the private market, while ensuring businesses are still able to access affordable terrorism insurance.

“We are pleased with the strong support received from reinsurers, with many existing markets increasing their capacity and a number of new partners added to our panel. This increased participation reflects confidence in our approach and enhances our ability to manage risk effectively. We also value our continued collaboration with Guy Carpenter in securing this deal,” commented Jonathan Gray, Pool Re’s CUO.

“The expanded programme aligns with Pool Re’s strategy to transfer UK terrorism risk to the market, further reducing the taxpayer’s exposure to potential losses. This remains a key pillar of our strategy and we are delighted with this successful outcome,” said Tom Clementi, Pool Re’s CEO.

“Guy Carpenter is proud to have secured another successful renewal for Pool Re, supporting them with their mandate to return more terrorism risk to the private market. Obtaining £2.75bn of capacity is a significant milestone and we thank all of Pool Re’s reinsurers for their support,” added Paul Moody, Guy Carpenter’s CEO UK.

Artemis’ sources suggest that with Pool Re’s currently in-force Baltic PCC 2022 cat bond scheduled to mature later this week, it is anticipated that the terrorism risk catastrophe bond will see a new vintage issued.

Should that happen, Pool Re would be able to lock-in some more multi-year retrocession from the capital markets, which would effectively expand its retro tower by however much in new limit is able to be placed with insurance-linked securities (ILS) funds and investors.

Last August, Pool Re signed up both Aon Securities and Howden Capital Markets & Advisory as its insurance-linked securities (ILS) advisors.

Pool Re has so far secured £175 million of retro terrorism ILS capacity from UK domiciled special-purpose vehicle Baltic PCC Ltd. via cat bond issuances in 2019 and 2022, to support its retrocessional reinsurance program arrangements.

Pool Re upsizes retro renewal 15% to £2.75bn. Sources say new cat bond likely was published by: www.Artemis.bm
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Global reinsurance giant Swiss Re disclosed that it anticipates losses from the January 2025 wildfires in Los Angeles, California will be below $700 million, while also reporting strong growth at the January renewal season for its property and casualty reinsurance business.

Swiss Re saw its group net income rise to $3.24 billion for full-year 2024, a slight increase on the $3.14 billion generated in 2023.

It resulted in a 15% return on equity (ROE) for the reinsurance company last year, which was slightly down on 2023’s 16.2%.

Group insurance revenues reached a new high of almost $45.6 billion for the year in 2024, up from the almost $43.9 billion of 2023.

All this despite the meaningful reserve strengthening previously announced after Q3 2024 for US liability exposures, which dented the result.

Swiss Re’s Group Chief Executive Officer Andreas Berger commented “Our focus in 2024 was on profitability and resilience. Our results for the period reflect this and show that we are on the right track: we have delivered strong net income and ROE, while achieving our goal of positioning overall P&C reserves at the higher end of our best-estimate range.”

Swiss Re’s Group Chief Financial Officer John Dacey added, “The strong underlying Business Unit performance is being supported by continued underwriting discipline and recurring investment income. The Group’s earnings power, combined with the reserving actions taken in 2024, give us confidence to increase the pay-out to investors by proposing an 8%
higher ordinary dividend of USD 7.35 per share.”

Swiss Re’s P&C Reinsurance division delivered net income of $1.2 billion for the full-year 2024, down on 2023’s $1.5 billion by around 20%, due to the aforementioned US casualty reserving actions.

But, even with large natural catastrophe losses of $1 billion for last year, the P&C Re division at Swiss Re still reported an 89.7% combined ratio for 2024.

As a group, Swiss Re also experienced a further $344 million of large nat cat losses in its Corporate Solutions division in 2024.

Targeted growth was a feature of Swiss Re’s 2024, with natural catastrophe and property reinsurance business volumes both increasing during the year.

Which has now continued at the January 2025 renewal season, as Swiss Re reported a 7% increase in reveal premium volumes to $13.3 billion for its P&C Re business at 1/1.

In addition, P&C Re achieved a price increase of 2.8% at the January 2025 reinsurance renewals.

Diving into the details of Swiss Re’s renewal, the reinsurer said that it adopted 4.2% higher loss assumptions, which are reflective of its prudent view on inflation and loss model updates, especially in casualty risks.

The company said that its strong renewal portfolio quality and a net price change of -1.5% remain supportive of a combined ratio target of below 85% for 2025.

There was around $500 million of business premiums that Swiss Re opted to non-renew at 1/1, as well as $900 million of new business secured.

Natural catastrophe premium volumes renewed rose by 2%, while property premium volumes soared 28% at the renewal season, while the strongest regional growth was in the EMEA at 11% and Americas at 4%.

For 2025, Swiss Re has adopted a large nat cat loss budget of $2 billion.

Obviously, the Los Angeles, California wildfires in January 2025 have taken an early bite out of the catastrophe budget for the current calendar year.

Swiss Re disclosed that it anticipates its losses from the LA wildfires will be below $700 million, impacting the first-quarter Group results.

The reinsurance company has based its estimate on an industry loss estimate of approximately $40 billion for the California wildfire event.

Later in the day, John Dacey, CFO explained that Swiss Re anticipates some recoveries from its retrocession for the wildfires.

Dacey said, “We think generally, within the $40 billion, about a third of this will be coming to the reinsurance market and multiple carriers, including frankly ourselves, are likely to offload some of the gross loss onto the retro programs that have been put in place by ourselves and other reinsurers.”

Looking ahead, Swiss Re targets $4.4 billion of group net income for 2025, ROE of above 14% and a P&C combined ratio of below 85%.

It’s testament to the strength of these global reinsurance businesses that they can come out with strong full-year targets even after a catastrophic event like the wildfires so early in the year.

CEO Andreas Berger further stated, “All our businesses have started 2025 in a strong position, thanks to the resilient foundation we have created and disciplined underwriting as evidenced by the successful January renewals. We remain focused on delivering on our targets for the year and reaching our cost efficiency goals.”

Swiss Re says LA wildfire loss below $700m, grows P&C Re 7% at Jan renewal was published by: www.Artemis.bm
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