1st View: Commentary by Lines of Business

Aviation

Ample capacity at 1.1.2025 led to a healthy, competitive tension between reinsurers this renewal. Non-proportional capacity was in plentiful supply, with buyers able to apply more pressure on reinsurers to improve the offered terms. Buyers were generally provided with more choices around structure and pricing alternatives. A blended mix of subscription and verticalized pricing was incorporated into some placements. Overall excess of loss pricing softened slightly, driven by increased supply.

Capacity levels for quota share placements were generally unchanged, although portfolio mix, back-year loss deterioration, and commission levels were all subject to close attention from reinsurers.

The trapped aircraft within Russia and the potential quantum of claims remains of concern to all parties, given the overall degree of uncertainty that continues to exist.

In the direct market, capacity levels remained strong, and rates have continued to soften. A combination of increased appetite from existing markets and the arrival of new capacity to the class broadened options for airline operators and buyers. Double-digit rate reductions have been evident, and vertical discounting was prominent as following/new markets looked to secure market share.

Just ahead of the market's key 1.1 inception date, the market learned of the tragic news relating to the Jeju Airline loss, on December 29, 2024. This loss will impact the 2024 underwriting and should further underline the need for airline insurers to change their approach to the pricing of airline business. Whilst it is far too early to make any comment around loss quantum, the resultant claims from this accident will further push the airline underwriting account into a deficit position.

Pricing within the general aviation market has similarly come under increasing pressure as certain markets have sought to further diversify their portfolios.

General levels of overcapacity have also continued to impact the products manufacturing segment, with pricing levels similarly coming under pressure, although perhaps to a slightly lesser extent than has been evident within the airline and general aviation sectors.

In aviation hull war and war third party liability, capacity was again plentiful in the direct market, with rating under severe pressure in the Q4 renewals — rate reductions of approximately -10% were seen, and differentials behind leaders have stretched further. All risk markets entered the segment to provide clients with a broader offering, and the continued expansion of line slips, thereby putting pressure on incumbents.

Reinsurers, meanwhile, have looked to maintain discipline in respect of deploying capacity and rating as of 1.1.2025; most renewals saw modest reductions due to overcapacity. Retention levels and vertical limits remained consistent year-on-year. Absent any material developments, the current environment within the war market is expected to continue throughout 2025.

Finally, the space market saw capacity contract, with several direct and reinsurance markets exiting the class, as the market continued to digest losses from 2023, which now total in excess of USD1.9B. At 1.1.2025, reinsurers generally looked to further trim excess proportional capacity from the market — resulting in approximately a -10% to -15% reduction in theoretical capacity.

Cedants that demonstrated superior results were able to secure loyalty from their (re)insurance panel. Commissions stayed flat. This is expected to create more upward pressure on rates through 2025, where there will likely not be enough available capacity to cover peak insured values of more than USD350M.

Cyber

Cyber renewals at 1.1.2025 saw a strong focus on obtaining the most efficient reinsurance structures, amid extremely healthy levels of capacity from reinsurers and an improved understanding of tail risk from buyers. Increased competition for both quota share, and excess of loss placements led to successful negotiations for improved terms and more effective coverage.

In the proportional market, it was a buyers' market as supply outstripped demand. This was driven by a lack of underlying growth, increased retentions and increasing reinsurer appetite. These factors, coupled with strong performance in recent years, allowed buyers to push for increased ceding commissions across the board and significant risk-adjusted rate decreases.

It was a similar picture in the excess of loss market, with plentiful supply. The increased amount of capacity was further supplemented as reinsurers who have traditionally been more proportionally focused entered this space in a meaningful way.

As portfolios become more balanced, the work carried out during 2024 by buyers and Gallagher Re to create greater confidence around systemic risk bore fruit as buyers' strategies notably changed transitioning from the tail and moving structures to further down the risk curve, which offered greater value. The resulting structures are more efficient in terms of attachment and price and represent bespoke products that are more appropriate for buyers' specific needs.

Another notable change from negotiations last year was the pivot in focus away from cyber war; something which dominated discussions at 1.1.2024. While the market is progressing towards reaching consensus on cyber war, we now have a clearer picture on the direction of travel as well as which underwriters are supporting a broader range of exclusionary language. Most reinsurers showed flexibility in supporting the market as it continues toward closer alignment. Innovation in structure increased throughout 2024 - notably with more ILS and ILW coming to the fore - alongside greater variety in traditional structures.

The worldwide IT outages resulting from the faulty CrowdStrike update once again highlighted to the market the loss accumulation potential from software and service supply chain concentrations. However, unlike previous supply-chain events, it brought to attention that non-malicious 'errors' could also produce a widespread impact, despite duration being mitigated by swift incident response. Following this event, Gallagher Re added a 'non-malicious' trigger to the Perils US Cyber Market index, thereby extending the basis of aggregation of the fledgling Cyber ILW utilizing this index. We have also seen greater adoption of Gallagher Re wordings which have always explicitly covered this. Gallagher Re's cyber team also undertook research work in partnership with Beazley and Munich Re in 2024 into the cyber market's resilience to extreme malware events, part of an ongoing program of work aimed at fostering confidence and helping the market to grow.

Engineering & Construction

Although deployed capacity remained relatively static in both the primary insurance and reinsurance markets, appetite for engineering and construction increased, within an enhanced overall appetite for specialty lines. Reinsurers have benefited from a profitable primary insurance market, following a sustained period of rate increases, discipline around terms and conditions (including deductibles), and line size deployment, together with a favorable macro-economic environment.

Following the exit of USD1.34B of primary insurance market capacity in 2018, we estimate USD450-500M has re-entered as of the end of 2024. Nevertheless, it is important to note that the risk appetite and targeted geography of this new capacity was often non-correlating, meaning the new entrants have not had a substantial impact on underwriting competition and discipline.

The global improvement in the inflation environment also resulted in growth in residential and mid-market business, benefiting both primary and reinsurance carriers.

While the Noor Energy solar energy plant loss notification in April 2024 (which fell under the 2018 underwriting year) was substantial, it did not drive a widespread market hardening for 1.1.2025 placements due to the loss being concentrated on a reasonably small number of insurers, rather than a wide market participation. There were no other risk or catastrophe events that had a substantial impact on the reinsurance market.

Reinsurers approached 1.1.2025 renewals with pragmatism. Where buyers could successfully demonstrate that their books had run well, they are pursuing a profit centric strategy, and that their reinsurance structure was sound, they were generally able to negotiate increases in commission.

Reinsurance structures remained largely static: quota share and/or excess of loss structures continued to attract the best deployed capacity from reinsurers, while appetite for surplus structures continued to be more restricted, and reducing.

Life, Accident & Health

The 1.1.2025 renewals for life, accident & health were placed with relative ease this year, amid good results and a broadening appetite from both incumbent and new reinsurers. While new entrants were not driving pricing disruptions, there was increased competition among reinsurers as they sought to write more business.

Risk-adjusted rates fluctuated between 0% to -10% for loss-free. First tier excess of loss programs saw ceding commissions remain flat, depending on the underlying portfolio and historical performance.Downward pressure on rates in the US was tempered by recent loss experience in the medical reinsurance sector, due to rapid advancements in high-cost therapies.

In EMEA, there were more reinsurers willing to enter the structured life space, but some reinsurers elected to leave the traditional reinsurance space after judging the business to be too low margin.

Overall, there was some increase in demand, as insurers looked to mitigate risks associated with pandemics, aging populations, and rising healthcare costs. Demand remained high for excess of loss per head, per event, and extreme mortality covers. There was also continued high activity in mass lapse with new programs implemented and bigger capacity purchased. Additionally, there were reductions in rates on line on retro programs where underlying exposure has been increasing. Purchasing strategies differed by territory. Reinsurers were once again open to writing sports risks — which had previously been avoided due to high losses — thanks to higher rates and improved loss stability. Some health treaties were terminated early however, driven by reinsurers' push to increase rates to allay their inflation fears, and buyers' reluctance to pass the uplift on to policyholders.

In the US, there was a trend towards more customized reinsurance solutions, with insurers seeking to tailor their coverage to specific needs and risks, rather than relying on traditional, one-size-fits-all products.

Looking ahead, the market remains sensitive to inflationary pressures on medical-exposed business, particularly in Southeast Asia and the US. In the US, rapid increases in high-cost therapies are creating uncertainty in forward looking claim projections (see the Medical Excess section of this report for more detail) but advances in healthcare technology and data analytics will provide opportunities for better risk assessment and management, potentially reducing claims costs and improving underwriting results.

In EMEA, the volatility of spreads over risk-free rates for government bonds continues to cause fluctuations in solvency ratios. As a result, insurers are seeking solutions to stabilize their solvency.

Passive war coverage within country of domicile was a big talking point, leading to increased concerns in the retro market. Tighter event definition clauses (more limited hours and narrower geographic limits) along with limited reinstatements given on passive war events are already evident. Overall, there continues to be a lack of consensus among reinsurers on exclusionary language around war and passive war due to the on-going conflict in Israel-Gaza.

Underwriters in the US will have a watching brief on the Affordable Care Act, which will likely come under scrutiny under the new Trump administration in 2025.

Marine & Energy

In general, we saw an abundance of capacity at 1.1.2025, reflecting the rate adequacy of the marine & energy reinsurance and retro markets. Demand for limit remained largely static, with no new major buyers coming to market. During the 1.1.2025 renewal, some buyers with growing portfolios sought to buy more retrocession to protect their growing exposure base. A number of buyers also sought coverage for energy transition-related risks.

On the supply side, there continued to be a limited number of leaders in both the first-tier reinsurance and retro markets, which tempered rate reductions, though softening was certainly evident given the plentiful supply of follower capacity.

Improved ceding commissions were offered on quota shares, and adjustments to event definitions in strikes, riots, and civil commotion coverage, as buyers sought to secure coverage better aligned to their own underlying exposures.

Reinsurance panels remained stable at 1.1.2025, as buyers sought to maintain relationships with incumbent reinsurers. Buyers were mindful of the potential for loss payments from events in recent months that remain on watching brief. With reference to the Baltimore Bridge event, the market has reached a consensus of a loss quantum of USD1.5B for the 2025 renewal. The impact of the Ukraine/Russian aviation war losses still remains largely unknown following this renewal period.

2024 saw reinsurers' macroeconomic and geopolitical spotlight shift back towards the US, in contrast to 2023 when the chief worries were exposures in Russia, Ukraine, and Belarus; Israel and the Red Sea; and China/Taiwan.

Renewables

The renewable energy market has continued to grow apace, with buyers seeking bespoke solutions for their coverage needs. Given this is a relatively new class of business, and the variety of ways in which buyers have developed their underlying portfolios, reinsurance solutions are far from homogenous.

Some buyers required broader definitions which can be woven in with traditional downstream policies, while for others, renewable business forms part of their overall marine and energy book. A minority of buyers have even expressed a strong interest in non-proportional, standalone solutions, specifically covering renewable power. In Asia Pacific, for example, many buyers sought standalone proportional solutions for renewables, mainly in offshore wind.

The demand was predominantly from China but elsewhere across South Korea, Taiwan, and Southeast Asia, buyers were looking to their broker to develop new treaty solutions for a wide range of original risks; from Battery Energy Storage Systems (BESS) to pumped hydro, to onshore wind, and solar.

In the US, while reinsurers were mindful of the modest margin available on renewable business, there was enough domestic capacity, with little business ceded outside of the US.

While MGAs continued to offer a healthy amount of capacity, traditional energy reinsurers also pivoted their approach, coming off binders and choosing to write the business on their own.

There was a desire from reinsurers to gain greater understanding around where potential clash catastrophe exposures might occur, as well as aggregation concerns around multiple renewable energy farms located in close proximity.

Medical Excess (US)

The US medical excess market enjoyed sufficient capacity for domestic buyers at 1.1.2025, following a year in which several new risk factors emerged.

New entrants have come to the market in recent years, which helped to bolster capacity levels. However, as has been common historically, this largely non-syndicated market saw most placements retained by the incumbent reinsurer. Buyers sought to increase retentions and retain more risk as they grew, to help offset the impact of rate increases. Buyers also continued to seek aggregate protections, but reinsurers' appetite for such products was limited to value-based care for Medicare Value Based Care Programs, given the well-defined nature of such programs.

Quota share reinsurance structures gained additional interest from buyers, given the flexibility and cost of capital that can be achieved.

The impact of first dollar medical trends (+7% to+8% commercial and +4% to +5% Medicare Advantage) in the underlying market fed through to renewals this year, including the anticipated increased use of high-cost drugs and the FDA approval of additional Cell and Gene Therapy treatments. Average renewals ranged from flat to +17% for most buyers with others experiencing higher increases, based on claims experience.

The Center for Medicare and Medicaid Services (CMS) made significant changes as part of the Inflation Reduction Act to Part D coverage as well as the government reinsurance program, in 2024. This increased health plan risk exposure resulted in rising reinsurance rates and an increase in the number of buyers looking to include Part D coverage in 2025.

One of the significant risk factors for 2025 and beyond is the unknown impact of emerging Cell and Gene therapies. Frequency is of concern to the market for cell therapy, while severity is the bigger issue for gene therapies.

At the time of writing, there were 14 approved gene therapies with a cost range of USD240,000 to USD4.25M per therapy. While the relatively high cost of such treatments initially caused concern for the US reinsurance market, the lower-than-expected uptake resulted in the loads and rates improving for coverage, and many reinsurers covering FDA-approved therapies.

In 2025 there are 10+ new therapies in the pipeline expected to be approved and the market anticipates expanded indications of use. This ongoing risk is prompting some buyers to look for alternative structures to provide risk protection.

While this remained an exploratory exercise for most cedants, we were able to help buyers consider — and in some cases execute — an alternative risk transfer for such therapies. Alternative risk transfer (drop down or Cell and Gene Therapy carve out solutions) is still very much an emerging market that needs careful evaluation by buyers.

Reinsurers' use of 'lasering' (where specific individuals with ongoing medical conditions are identified within a group policy and are underwritten with a higher stop loss deductible) continued to be used as a means of risk mitigation.

Retrospective

The retrospective market showed signs of stabilization in H2 2024 after the preceding 18 months featured a contraction of counterparties offering cover and an increase in execution risk, amid material prior year adverse development across certain lines and jurisdictions.

Inflationary pressure on loss reserves remained a material concern, and reinsurer price discipline therefore remained high. Bid / ask spreads appeared to be narrowing, aided by cedant reserve strengthening actions and reinsurers becoming more comfortable with prior year development across older years.

The amount of capital available to deploy remained plentiful with larger consolidators continuing to seek strategic transactions. Mid-size and smaller counterparties sought to play to their strengths, offering solutions across a range of classes of business and deal structures.

At the time of publication, two mega deals in 2024 had been confirmed, alone worth close to USD4B. Although completion rates are improving, the total number of deals closed in 2024 is likely to fall below the recent peak years of 2019—2022. Gallagher Re estimates circa 30 deals representing approximately USD6-7B reserve volume being completed in 2024 (subject to the timing of transaction closures at year end).

From a geographic perspective, North America was the most active region in 2024 with the market focusing more on workers' compensation than any other class. UK & Ireland activity picked up in the latter half of 2024, this was driven largely by UK motor and Lloyd's opportunities. Ogden rate certainty (see UK motor section) will increase the likelihood of execution decisions in 2025. Deal flow in continental Europe remained subdued, as a result of cedant capital dampening their motivation to transact. Retrospective interest in the APAC region is increasing as companies continue to explore both capital optimization and M&A opportunities.

Overall, the market continued to demonstrate its flexibility in approach, providing a variety of solutions that offered renewable pricing frameworks, relief for trapped capital and forward-pricing mechanisms.

Trade Credit

Strong reinsurance treaty performance and an increasing amount of capacity led to an orderly renewal in trade credit at 1.1.2025.

There was little change to buyers' behavior regarding structure. Risk-adjusted rates were broadly unchanged, taking account of exposures. Compared with the last two renewals, which saw limits increase driven by inflation, there was limited upwards pressures on reinsurance limits purchased.

Increased appetite from existing reinsurers, alongside interest from new entrants, meant capacity was plentiful. Further improvements in terms and conditions were found, particularly on quota share business where a variety of commission arrangements were agreed.

Underlying results from the primary market continued to trend well, despite the normalizing of corporate insolvencies post COVID-19. The increase in underlying insolvencies has not resulted in material losses in the primary market, which is still trending below long-term averages. This has attracted an increase in the number of insurers which, as a result, has increased competitive pressures.

Property Catastrophe

Pricing moderated down on average, while premium trended up on exposure growth. The top end of excess of loss towers experienced the steepest competition as reinsurers remained focused on loss frequency mitigation.

In the US, reinsurers demonstrated a desire to grow with their core clients and select new partners exhibiting specific characteristics fitting going-forward underwriting strategies. The demand from buyers held largely steady, having reached more of a balance between growth, economic inflation, and cost. While there were no meaningful changes to purchasing strategies, some buyers did explore coverages that they were priced out of last year, such as catastrophe aggregate coverage towards the top of programs. In a number of cases, there was a continuation of the trend to consolidate the number of reinsurance partners to those providing the broadest support, while balancing desired levels of diversification.

Loss-free programs typically experienced risk-adjusted single digit decreases on average, compared with single-digit increases in 2024; loss-impacted programs were more dependent on individual account circumstances and experienced a wider range of outcomes but on average renewed with low teens increases, compared with +35% to +40% the year before.

In EMEA, property catastrophe supply remained robust, with an increasing appetite from both existing and new players, reflecting the pricing adequacy within the market, and the fact that the majority of reinsurers were eager to defend their share.

While capacity remained ample, discussions around view of risk were a core feature during the renewal, following recent loss activity. We expect these conversations will continue into 2025.

After the relative shock of the late renewal at 1.1.23, many cedants brought their books to market earlier this year, and a number investigated potential additional limit purchases, with Turkey a particular focus.

Top layers saw intense competition with meaningful risk-adjusted reductions for renewing layers and significant capacity offered for any additional purchases. With little pressure from reinsurers to further increase retentions, there was sufficient supply for bottom layers in EMEA, when terms and conditions were acceptable. Where pricing was deemed unacceptable, this led some clients to explore structured solutions at the lower end of programs.

In Asia Pacific, there has been a significant shift in buyers' favor, with property reinsurance protections moving to a more affordable level, reflecting cedants' own premium and exposure growth.

Compounding the challenge for reinsurers has been the limited demand for additional limit purchases, at a time when they all seek growth in this diversifying region.

As a result, meaningful risk-adjusted rate reductions on loss-free programs materialized, leading to overall reductions in monetary spend. Loss-affected programs have seen modest rate increases.

And in the UK, catastrophe demand continued to shrink amid sustained merger and acquisition activity, which led to greater competition for the remaining cedants' books.

Loss-free programs were completed with risk-adjusted rate reductions of, in some cases, double digits, amid another benign year for catastrophe activity. Retentions were largely static on a monetary basis.

There were notable changes to coverage as Gallagher Re focused on better matching event parameters to coverage provided on flooding hours clauses — from two weeks to three weeks, or 504 hours.

Negotiations for the return of prepaid reinstatements for the top layers of programs, after diminished acceptance at 1.1.2023, were also successful on a case-by-case basis.

Property Per Risk

Per Risk outcomes are typically highly dependent on individual account characteristics, including loss activity, underwriting approach, lines of business, and portfolio mix.;

There were several noticeable trends during the 1.1.2025 renewal, however.

With continued concerns around frequency-driven loss activity, US supply remained constrained despite positive rate movements over the past few years, with only a few reinsurers looking to grow in this segment.

Loss-free programs generally renewed flat to +10%, while loss-impacted renewals averaged increases of +10% to +20% with wide variability.

Across International, meaningful losses experienced in the last five years made legacy reinsurers less enthusiastic, while still supplying capacity, leading to discussions around retentions.

However, with rates at an historic high, a few new entrants in EMEA emerged, allowing cedants to maintain existing structures. This ensured that contractual language was upheld, despite discussions around strike, riot, and civil commotion, and non-damage continent business interruption.

Overall, the magnitude of pressure on pricing did not materialize to the degree expected earlier in the renewals. This, combined with underlying valuation growth in portfolios, generated flat to negative risk-adjusted rate change for loss-free cedants.

In the UK, 2024 was an average year for risk loss — the largest event being water damage to a construction loss. Capacity levels were largely stable, with programs renewing at broadly flat risk-adjusted rates.

Political Risk

While 2024 saw some claims development with regards to events in Russia/Ukraine and a number of sovereign defaults, the market as a whole remained profitable.

Buyers that experienced a disproportionate volume of losses were offered higher rates. For those accounts that ran loss-free, rates began to soften amid improvements in terms and conditions.

Reinsurers remained risk aware with this class of business, which meant they were pragmatic when it came to putting down lines. However, there was evidence of new entrants expressing interest at 1.1.2025.

Changes to program structures were largely around excess of loss attachment levels for loss-affected accounts or where the buyer requested a larger limit. Increased limit requests were mainly driven by buyers increasing their maximum risk lines, in order to deploy larger lines on target business and to enable them to contend with their peers in a competitive market.

UK Motor

The timely arrival of the Personal Injury Discount Rate (the Odgen rate) decision for England and Wales (a rate which defines the level of compensation for future financial losses in the form of a lump sum in personal injury cases) in early December 2024 allowed for a relatively straightforward motor renewal for the UK & Ireland.

The increase in the Ogden rate from -0.25% to +0.50% is a positive for primary insurers, and this, alongside sufficient reinsurance capacity, allowed buyers to secure meaningful double-digit excess of loss rate reductions. Reinsurers were pragmatic in their negotiations, buoyed by the reduction in their own large loss reserves, due to the Ogden rate increase.

Ample supply of capacity meant there was sufficient market pressure to achieve competitive pricing on excess of loss programs. Additionally, those primary insurers that are more capital constrained were able to get their quota share treaties placed with relative ease.

Buyers sought value at this renewal, and if reinsurance was not priced attractively enough, they retained more and considered more structured reinsurance solutions at the lower end of programs.

US Surety

There was an orderly renewal for US Surety at 1.1.2025, as buyers and reinsurers reached an equilibrium in a broadly firming market.

While supply and demand dynamics remain stable with adequate capacity, there have been some material changes in reinsurer panels, indicating a lack of consensus on reinsurance terms and overall market outlook. Additional interest from reinsurers in this class of business, from both US and European markets, offset disruptions from incumbents.

Demand was flat, year-on-year, as buyers were comfortable with the amount of limit purchased the year prior. This followed two years of additional vertical limits being bought by some buyers, in line with inflation.

While surety has continued to be profitable overall in 2024, there was an increase in development on prior year losses, particularly in the energy sector and developer surety.

With reinsurers assuming a significant portion of market volatility in recent years, they continued to seek increased retentions, exerting rating pressure on reinstatement premiums and expressed an overall strong desire to obtain sufficient rate for the exposure they assumed.

Successful placements were achieved by buyers that effectively communicated their underwriting strategies, supported by strong portfolio analytics. As a result, reinsurers supported risk-adjusted price reductions for those buyers whose portfolios demonstrated strong portfolio credit quality and whose operations were well-positioned to capitalize on market opportunities. Adverse loss development on programs led to both rate and structural adjustments.

FinPro

As reported in prior years, there is a broad range of products within financial lines, with different market cycles and therefore reinsurance outcomes. This year, that can be broadly divided into US public directors' and officers' (D&O), transactional liability, and everything else.

US public D&O has had three negative-rate years, and continued adverse development in older years, offset by early signs of very favorable development in policy years 2021-2023. Modelled loss ratios that extrapolate by trending and developing incurred values to ultimate remain elevated.

As a result, reinsurance conditions remained challenging, although there were signs of an improving rate environment and, more importantly, a favorable delta appeared to be emerging between how the more recent years ought to have been performing and how they are running in reality.

Public D&O is an especially challenging class of business to forecast with wide swings in both frequency and severity born of the underlying complexities and externalities that inherently drive loss activity. Therefore, public D&O-weighted treaty terms were under pressure again this year and coverage restrictions were introduced to minimize reductions to ceding commissions.

As a result of depressed underlying rates and potentially significant losses working their way through the market, many transactional liability reinsurers are reining in capacity, regardless of quota share commission terms, which are also coming down.

The concerns are driven by accumulation management after a series of significant market losses with multiple cedants deploying lines on single towers. The transactional liability market has historically operated with single carriers deploying large limits. This was historically to ensure large(r) limits were available with minimal delay and as close to real time with the underlying transaction negotiations and ultimately deal closure. Brokers could negotiate large blocks of limit making changes to placements as the deal was being negotiated 24 hours a day with a single carrier block of capacity.

As these limits were deployed on larger towers, especially contingent liability towers, the reinsurers became aware of the potential for aggregation and several large recent losses have highlighted those concerns in the contingent liability sub space. These losses have also highlighted the extent to which the transactional market has broadened from its roots in the representations & warranties/warranties & indemnities space to a far broader set of coverages.

For monoline errors and omissions (E&O) and/or private D&O placements, capacity was plentiful, and terms were flat-to-improving, depending on the specifics of the deal. Typically, these lines are embedded in broader treaties including US public D&O and serve to smooth overall treaty terms.

From a capacity perspective, with the exception of transactional liability, the market was stable, and most treaty panels renewed with incumbent markets with small share movements. There were some signs of increased interest at 1.1.2025, with select markets feeling more optimistic about the experience in recent years and looking forward.

For most buyers, the goal was to hold the line on terms and capacity. We also saw increasing interest in excess of loss to supplement quota share purchases.

Specialty Rate Movements

ILS / Alternative Capital

ILS continues to be an integral component of the overall reinsurance purchasing decision for a variety of buyers.

Demand from buyers was extremely strong, with a number of sponsors coming to the market in 2024. By year-end 12 new sponsors entered the cat bond market, running just shy of the 15 recorded in 2023.

Hurricanes Milton and Helene did not impact the cat bond or collateralized reinsurance market directly, although they did prompt some investor wariness around the flood peril. However, the 2024 cat activity will not discourage further fundraising in this space.

As such, capital supply remained very strong, with some ILS fund managers raising capital and more investors coming into the space. This was driven by the fact that the cat bond asset class was the highest yielding hedge fund strategy in 2023, returning around 20%. 2024 is set to return nearly as much for investors and will be a record year for issuance in the cat bond market, surpassing 2023's total of USD15.37B in Non-Life Underwritten Rule 144A catastrophe bonds. Based on the pipeline, 2025 will be another strong year of issuance.

Demand for collateralized reinsurance is also returning. In addition, we have witnessed increasing efforts to expand solutions outside of cat bonds and property-related collateralized reinsurance, such as the development of casualty sidecars.

The use of parametric triggers has doubled from three cat bonds in 2023 to six by year-end 2024. We also saw parametric sidecars and collateralized reinsurance transactions using parametric triggers.

Cyber cat bonds continued to be a big growth area for the ILS market. Gallagher Re has been instrumental in building out the cyber-ILS market. As of Q4 2024, Gallagher Securities placed more than 60% of the cyber rule 144A cat bond market. Growing interest from investors is driven in part by the education that Gallagher Re has undertaken to introduce this class of business to the market.

The need to expand investor participation is critical to market development with demand also growing: the market has gone from no cyber cat bonds a couple years ago to six outstanding cyber cat bonds, with USD785M from four different sponsors — with additional sponsors looking to support cyber cat bonds in future.

The CrowdStrike cyber event, whilst it was large in scale and well-publicized, does not appear to have caused losses to any of the outstanding cyber cat bonds. Investors have been cautious about the impact of large and/or systemic cyber events, and how they might compare to modelled outcomes. As such, the experience of this event has been helpful, and the lack of severe outcomes will likely aid the growth of this market.