Credit and political risk reinsurers set to hold firm if no further major loss activity

Credit, bond and political risk reinsurers are expected to build on the stabilisation of capacity seen throughout 2024 and hold their position at 1 January 2025 renewals, The Insurer understands.

Ample capacity is expected to more than meet demand, although there could be potential challenges for peak limits in some circumstances, brokers said.

Continued strong results throughout 2024 are expected to bolster this drive for consistency within the market, with reinsurers expected to hold their position at 1.1.

However, the effect of inflation, restricted retrocession capacity and increased geopolitical tensions in the wake of election results could force reinsurers to review rates, brokers said.

Earlier this month Gallagher Specialty said November’s US election is the most significant event on the horizon for the credit and political risk insurance market, with “dramatic consequences” for the global risk environment.

Higher retentions

In a report issued ahead of last month’s Monte Carlo Rendez-Vous, Aon noted that the market’s portfolio volumes and peak limit capacity requirements have increased.

As a result, it said reinsurers are looking to alter excess of loss (XoL) structures with a focus on higher retentions, albeit some loss-free programs are also seeking risk-adjusted rate reductions.

A separate report from Guy Carpenter, also issued ahead of last month’s Rendez-Vous and before hurricanes Helene and Milton impacted the US, said quote ranges are expected to continue to narrow for both quota share and XoL programs, with a trend towards quota shares reflecting an expectation of higher commissions.

Brokers emphasised that the credit and political risk market continues to offer growth opportunities for reinsurers, particularly new entrants to the class.

Exposures have increased across credit and surety treaties, largely driven by inflationary factors and shifts in bank capital requirements.

Even non-traditional credit insurance – where capacity remains limited – is growing, Aon said in its report. Political risk is understood to be the tightest of the market’s sectors.