Following the Monte Carlo Rendez-Vous, Berenberg, the German investment bank and equity research firm, emphasises that reinsurance brokers are pushing for an orderly transfer of margins from reinsurers to cedants.
In its post-Monte Carlo report, Berenberg stresses that brokers are actively encouraging an orderly transfer of margins from reinsurers to cedants.
With the top four brokers — Aon, Guy Carpenter, Gallagher, and Howden — controlling around 85% of the reinsurance distribution market, Berenberg believes this concentration creates stability rather than disruption.
The bank argues that, unlike in the past when a fragmented broker landscape led to inconsistent and unpredictable pricing, today’s concentrated distribution base ensures a smoother, more coordinated adjustment of terms across the sector.
According to Berenberg, reinsurers are now making measured concessions on terms and conditions. They are showing greater flexibility on aggregate treaties and natural catastrophe attachment points, while remaining cautious to limit cover to less frequent one-in-10-year events. Berenberg highlights that this willingness to ease terms comes with a quid pro quo: reinsurers are rewarded with higher business volumes in more profitable, unrelated lines.
Berenberg’s analysis suggests that although margins are being compressed, overall profitability is being maintained through greater volumes. The firm cites S&P forecasts, which project reinsurance sector returns on equity to ease from a peak of 21% in 2023 to around 12% by 2026.
While this represents a step down, Berenberg stresses that these returns remain comfortably above its estimated 9% cost of capital. The bank also questions the conservatism of S&P’s 2025 estimate, arguing that the absence of major Atlantic hurricanes so far this year provides grounds for optimism.
On growth prospects, Berenberg estimates that reinsurance premiums are likely to rise by about 9% by 2026. Around 5% of this increase will be driven by claims inflation, with another 4% from higher exposures.
In contrast, capital is expected to grow by around 15%, split evenly between traditional reinsurers and alternative capital providers. According to Berenberg, expansion is particularly visible in Latin America, the Caribbean, and Asia, where premiums are steadily climbing.
Berenberg also points to strong balance sheet buffers as a stabilising feature. With S&P calculating roughly $110bn in excess capital across the sector at the end of 2024, reinsurers are well-protected against even one-in-500-year natural catastrophe events.
Berenberg notes that many reinsurers added to reserves during the first half of 2025, when catastrophe losses stayed broadly within expectations — a clear sign, in the bank’s view, that underlying earnings are stronger than reported results show.
However, Berenberg cautions that US casualty remains a persistent risk. Reserve additions of around $10bn a year continue to weigh on sentiment, making it a key watchpoint for the sector.
In summary, Berenberg concludes that the reinsurance market is experiencing a managed transition rather than disorderly change.
The influence of brokers, the steady flow of new business, and resilient capital all underpin its view that reinsurers will continue to earn returns above their cost of capital, even as margins narrow.
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