Investor caution looks set to drive further double-digit increases in retro pricing at the upcoming 1 January renewals, according to panelists at The ReInsurer’s second virtual debate.


Increasing caution among investors has led to significant hardening this year at retro layers, amid concern about the scale of trapped capital from loss events of recent underwriting years.

Rupert Swallow, chief executive of Capsicum Re, told the panel debate the retro renewal will see a shift in the way people buy cover.

“Year-on-year, rate increases of 20 or 25 percent are feasible, and these could be even higher depending on what happens between now and 1.1.”

Jason Howard, CEO of Beach & Associates, said he did not expect retro conditions to ease going into the 1.1 renewals.

“The ILS market has retreated significantly in the collateralised reinsurance space this year. While the cat bond market has continued to trade successfully and investors have been pleased with results, collateralised reinsurance has been tricky.

“We have sold a lot more ILW covers. The ILS market is happier to invest in those as there is a much tighter box around what they are writing.”

Howard said the extent to which rates rise at retro layers will determine buying habits at 1.1.

“Retro buyers are very smart buyers – they know exactly what their exposures are and will not overpay for the product.

“We are seeing a lot of retro buyers withdrawing from the market or buying less. Many are looking at other capital management tools to manage their exposures.”

Because of this, Howard said it was unlikely the retro market would see a “free for all with rates going up 50 percent – it’s much more sophisticated than that”.

Jean-Paul Conoscente, CEO of Scor Global P&C, said several carriers were now adjusting their retro plans, “especially the ones who were being more optimistic about how they bought their retro.

“They are needing to find different solutions - capital raising being one of them,” he said. 

“Beyond a certain price level, buying retrocession stops making sense economically. The key is to find some balance whether it makes sense economically or not”.

Ann Haugh, president of global markets at Axis Re, said there was potential for a reduction in retro capacity at 1.1.

Haugh said hardening would continue at reinsurance layers as the market worked to improve its sustainability following several years of poor results.

“Alongside Covid-19, this year will be remembered for perpetuating loss activity. We are still in the middle of cat season so there are potentially more losses to follow.”

Vivek Bajaj, managing director for Europe & Asia-Pacific at RMS, said the key challenge for the sector was for how long hardening could be sustained.

“It’s really a fight for capital, and how we sustain the excess capacity that might begin to appear,” he said.

“During this renewal season, where we will be without the benefit of Monte Carlo and other events to work through issues, we will all need to make sure we leverage our relationships and new way of working in a meaningful fashion to avoid any excess capacity occurring.”

Watch “Reinsurance in a time of Covid-19” in full:


  • Vivek Bajaj, Managing Director, Europe & Asia-Pacific, RMS
  • Jean-Paul Conoscente, CEO, SCOR Global P&C
  • Ann Haugh, President, Global Markets, Axis Re
  • Jason Howard, CEO, Beach and Associates
  • Rupert Swallow, CEO, Capsicum Re (which will trade as Gallagher Re from 01 October 2020)
  • Sophie Roberts, content editor, The Insurer (Moderator)