The reinsurance market has been through one of its more significant dislocations in recent memory, and the effects are still working through the primary market.
Elevated catastrophe losses, loss reserve deterioration in several casualty lines, and inflation-driven loss cost increases all contributed to a period of reinsurer caution and elevated pricing. For primary carriers, this meant higher net retention, tighter treaty terms, and in some cases the need to restructure product offerings to avoid the exposures reinsurers were most reluctant to cover.
The carriers managing this environment best are those with the modeling capability to understand their own exposure at a granular level — not just what they think they are writing, but what they are actually accumulating across all policies in force. Surprise accumulations are what turn a bad year into a catastrophic one.
As reinsurance capacity begins to expand again in certain lines, carriers that maintained discipline and transparency with their reinsurance partners during the hard market are positioned to get better terms in the softening.
Relationship quality with reinsurance partners is a long-cycle asset. The transparency and discipline you demonstrate in a hard market is the credit you draw on when conditions improve.
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