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, according to Aon.

And, absent any major loss activity over the remainder of 2024, Guy Carpenter said that reinsurers are likely to “hold their position” at 1.1.

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

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

Aon noted that the market’s portfolio volumes and peak limit capacity requirements have increased. As a result, 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.

Quote ranges are expected to continue to narrow for both quota share and XoL programs, with Guy Carpenter emphasising that the trend towards quota shares reflects 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, said Aon. Political risk is understood to be the tightest of the market’s sectors.