Category: Reinsurance renewals

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Despite catastrophe bond risk spreads having tightened and reinsurance rates being expected to decline at the renewals, specialist insurance-linked securities manager Twelve Securis says the relative value of the ILS asset class remains compelling for investors with structural improvements set to persist.

The trend of spread tightening in the catastrophe bond market has been reinforced by strong demand for the asset class, as well as the lack of losses faced, the investment manager explained in a new thought-leadership piece.

This spread environment, driven by seasonal and structural factors, has served to make the cost of risk capital and reinsurance protection cheaper for cat bond sponsors, which has been helping to drive the significant issuance levels seen this year.

Twelve Securis explained, “The cat bond market remains inherently cyclical. Periods of tightening markets often attract opportunistic issuers, while elevated spreads can moderate supply. Although reinsurance capacity has deepened and competition has increased, overall conditions still support robust issuance activity.

“This tightening has also encouraged the entry of new or non-traditional issuers, including corporates exploring risk transfer solutions for climate-related exposures. While the market remains dominated by U.S. hurricane and earthquake risks, we are seeing gradual broadening into secondary perils such as wildfires and severe convective storms as well as continued participation from European sponsors.

“Parametric structures remain an important innovation area, yet indemnity triggers continue to dominate due to their lower basis risk and closer alignment with traditional reinsurance mechanisms.

“Looking ahead, we expect that continued heavy primary issuance could introduce a stabilising effect on spreads. As more risk enters the market, investors will have greater ability to differentiate and allocate selectively, fostering equilibrium between pricing and demand.”

Twelve Securis forecasts that issuance levels should remain robust, and that “market sentiment suggests the trend will continue into the foreseeable future.”

Cat bonds remain an attractive asset class for investors, comparing well with other asset classes, the ILS manager notes.

“Despite the compression, relative value remains attractive, particularly versus corporate credit and high-yield markets.

“Cat bonds continue to offer an appealing premium, alongside diversification and low correlation benefits in a volatile macro environment,” Twelve Securis wrote.

Summing up on cat bonds the manager further stated, “The cat bond market remains a fundamentally healthy and expanding asset class. It offers meaningful spreads, strong underlying discipline, and low correlation to broader financial markets, all attributes that continue to underpin its role as a strategic diversifier. In an environment marked by geopolitical tension, inflation volatility, and overvaluation in traditional markets, cat bonds stand out as a resilient and attractive investment opportunity poised for further growth through 2026.”

Turning to private insurance-linked securities, the opportunities that see private reinsurance and retrocession structured into investment funds and opportunities for allocators, here Twelve Securis sees conditions also remaining attractive for investors.

With the 2026 renewals in sight, Twelve Securis expects to see, “a market entering a more balanced phase following two years of strong underwriting performance.”

“Leading into January 2026, in our view capacity will be marginally higher year-on-year, introducing some pricing pressure,” Twelve Securis forecasts.

Adding, “We expect moderate rate reductions in the upcoming renewal cycle, particularly in remote catastrophe layers where competition from the cat bond market is most pronounced. Across the broader market, pricing is likely to decline more gently, continuing the gradual correction from the post-2023 highs. The private reinsurance market remains more constrained in supply relative to capital markets, which should limit the extent of price softening.”

Despite the expectation of price softening, Twelve Securis goes on to say that, “Investor sentiment remains constructive,” on ILS opportunities.

“Cat bond spreads have tightened, yet the relative value of reinsurance risk remains compelling compared to traditional credit markets. Private ILS investors, having experienced resilient performance through recent events such as Hurricane Ian and the 2025 wildfires, retain confidence in the structural robustness and alignment of interest within the ILS framework,” Twelve Securis adds.

Also highlighting that, “We are observing selective capital rotation from cat bonds into private reinsurance strategies which is an indication of continued institutional engagement rather than new speculative inflows.”

Importantly though, when it comes to the January 2026 reinsurance renewals, Twelve Securis is expecting discipline to remain firm on important contract structural features such as attachment points.

In fact, the investment manager is anticipating discipline will be maintained on many of the important changes and updates that the ILS market has introduced over the last few years.

The investment manager wrote, “The defining feature of the 2026 renewals will be the negotiation around attachment points and coverage breadth. While buyers may seek broader protection, particularly for secondary perils such as wildfire, discipline across the market remains strong, and high attachment points continue to provide meaningful insulation from volatility.

“We expect the structural and behavioural improvements achieved during the hard market of 2023 – tightened terms and conditions, improved peril definitions, and mechanisms such as collateral trapping adjustments – to persist beyond this cycle.

“These changes have enhanced capital efficiency for cedents and investors alike and continue to strengthen the market’s long-term resilience.”

Summing up, Twelve Securis stated, “Robust issuance, disciplined pricing, and continued investor demand leave the market well-positioned for 2026. ILS remains a resilient, diversifying asset class offering attractive, risk-adjusted returns in an otherwise uncertain global market environment.”

Cat bond and ILS structural improvements to persist beyond this cycle: Twelve Securis was published by: www.Artemis.bm
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While moderate softening in U.S. property catastrophe reinsurance rates has been observed throughout 2025, rating agency AM Best projects that further stabilisation or minor price shifts will take place at the upcoming January renewals.

In a recently published report, AM Best revealed that it has revised its market segment outlook for the U.S. homeowners’ insurance segment to stable from negative, with the agency citing moderating premium growth and enhanced catastrophe risk management practices amid improved property reinsurance market dynamics.

“The US homeowners market improved its resilience amid elevated catastrophe losses reported throughout 2025. Premium growth remains robust, albeit the pace has slowed compared to the prior year, driven by rate activity and expanded coverage demands,” the agency explained.

“Reinsurance market conditions continue to play a pivotal role, reflecting moderate softening of property rates, while terms and conditions remained consistent. The demand for coverage remains strong due to heightened weather loss activity and general economic and political uncertainty.”

As mentioned, property catastrophe reinsurance rates are expected to experience a “minor” decline at the 1/1 2026 renewal season, according to AM Best.

“January 2026 renewals are expected to see further stabilization or minor price shifts, though less comparative relief is expected for primary carriers operating in catastrophe-prone states,” commented Maurice Thomas, senior financial analyst, AM Best.

Adding: “Overall, the improving reinsurance dynamics in 2025 helped to alleviate pressures in the homeowners’ segment, fostering its resilience. Nevertheless, the segment remains inherently exposed to the effects of weather-related operating volatility.”

Nonetheless, the current pricing trends in the catastrophe bond market may suggest that rates for higher-layer catastrophe reinsurance could experience a more significant decline than the slight decrease projected by AM Best.

It’s also important to highlight that a number of US homeowner’s insurers have returned to the catastrophe bond market this year to secure longer-term reinsurance from capital markets, likely motivated in part by the robust execution that’s being observed.

It’s worth highlighting the attractive pricing of reinsurance coverage from the capital markets through catastrophe bonds, as this does imply higher-layer property cat renewals could face more than minor pressure on rates at the renewals.

Furthermore, Thomas noted that better performers within the homeowners’ insurance space have maintained solid risk-adjusted capitalization with sufficient liquidity.

“However, the capital cushion has eroded for some carriers in high-risk areas due to material operating losses driven by severe events, most recently from the January wildfires in California and severe tornado outbreaks across the country in the first half of the year,” Thomas explained.

Concurrently, AM Best also observed that Q3 2025 provided a notable respite for the segment, with the quarter being exceptionally quiet for natural catastrophe activity.

This relief followed an intense first half of the year for the segment, which was primarily dominated by the January 2025 California wildfires and severe tornado outbreaks through the summer.

While other noteworthy events included severe floods across Central Texas and Milwaukee.

The agency noted that profitability for the segment will likely benefit should storm activity remain benign throughout the remainder of 2025.

To conclude, AM Best said: “Overall, the US homeowners segment continues to show signs of stabilization owing to solid (albeit moderating) premium growth, as well as refined underwriting practices amid improved property reinsurance market dynamics. However, carriers continue to face market challenges, including elevated frequency and severity of extreme weather events (specifically secondary perils) and inflationary pressures. Technology advancements will continue to transform the market landscape while regulatory changes remain a key consideration.”

US property cat reinsurance rates to see “minor decline” at 1/1: AM Best was published by: www.Artemis.bm
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Blockchain-backed reinsurer Re has announced the deployment of $134 million in reinsurance capital across multiple programs as the industry begins to head into the key January renewals season.

Re is a decentralised reinsurance infrastructure platform that leverages blockchain technology, seeking to bring greater transparency and efficiency to the global reinsurance capital market.

Established in 2022, the company bridges traditional and crypto capital markets with reinsurance, enabling investors to earn yield from insurance premiums while giving insurers streamlined access to capital.

Moreover, Re confirmed that as the January 1st renewals unfolds, the $134 million of reinsurance capital will be deployed across its insurance partners’ programs, as well as renewed authorisations.

The deployment of reinsurance capital for the renewals has been made across a broad range of insurance lines, including commercial auto, general liability, property, and workers’ compensation.

The firm emphasised that these authorisations represent real insurance programs supported by Re’s on-chain capital infrastructure rather than abstract financial products.

“This milestone reflects more than just a number. It’s evidence of growing confidence in Re’s model, the maturation of our marketplace, and our expanding role as a critical piece of infrastructure in the global insurance system,” Re commented.

The firm also outlined how its marketplace continues to gain meaningful, sustainable traction.

“We’re not just building infrastructure in isolation. We’re actively deploying capital that protects businesses and individuals across the economy,” Re explained.

“The fact that this $134 million includes both new programs and renewals is particularly meaningful. New programs show that additional insurers are choosing to work with Re. Renewals demonstrate that existing partners are seeing value and coming back. Both signals point to the same conclusion: the model is working.”

Additionally, Re highlighted three key ways in which blockchain technology is helping to strengthen the reinsurance market.

“Traditionally, this market has been dominated by large institutions operating through opaque, inefficient processes. Deals get structured through lengthy negotiations, capital allocation happens behind closed doors, and access to the market has been limited to the largest players. Re is changing that equation.

“By bringing transparency, efficiency, and accessibility to reinsurance through blockchain technology, we’re creating a more resilient global safety net for insurance risk. Capital providers can see exactly what they’re backing, insurers can access capacity more efficiently, and the entire process operates with transparency,” the company explained.

Re continued: “The insurance industry is facing mounting pressures: climate change is increasing the frequency and severity of natural disasters, economic uncertainty is creating volatility in claims patterns, and traditional reinsurance capacity has become more expensive and harder to access in certain lines. In this environment, innovation isn’t optional, it’s essential.

“The industry needs new sources of capital, new ways of structuring risk, and new infrastructure that can adapt quickly to changing conditions. Re provides all three.”

Concluding: “As the January 1st season unfolds, this authorized capital will be deployed across our insurance partners’ programs. Each dollar represents coverage capacity, the ability for insurers to confidently write policies, knowing they have reinsurance backing. We expect this momentum to continue. As more insurers experience the benefits of Re’s platform, and as more capital providers see the risk-adjusted returns available, the network effects strengthen.”

Blockchain reinsurer Re deploys $134m in reinsurance capital for Jan renewals was published by: www.Artemis.bm
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Over the last year the California Earthquake Authority (CEA) has benefited from strong execution in the catastrophe bond market to lower both its reinsurance attachment point and costs associated with risk transfer.

With now three catastrophe bonds sponsored so far in 2025, the California Earthquake Authority (CEA) has steadily increased the capital markets share of its overall reinsurance tower arrangements.

While price execution in the cat bond market, thanks to what are now dramatically reduced spreads over its cat bonds issued through the last year, have assisted. Notably, it is also cat bonds that have helped the earthquake insurer shave $400 million of the attachment point for its reinsurance protection.

When we last reported on the CEA’s reinsurance tower, the traditional and collateralized or fronted reinsurance limit component had declined to $5.22 billion as of July 31st 2025.

Now, the latest data available shows a further decline in this traditional reinsurance component, with it falling to just over $5.06 billion as of September 30th 2025.

At the same time, the catastrophe bond market component had reached $2.61 billion as of the same date, with this having increased thanks to a June cat bond issuance, the $400 million Ursa Re II Ltd. (Series 2025-1).

As we reported this week, the CEA has now secured a further $770 million in cat bond coverage from its latest Ursa Re II Ltd. (Series 2025-2) deal, which settles in the next week.

For the CEA, the capital markets and catastrophe bond investors have delivered significant value in risk transfer terms over the last year.

Roughly a year ago, the CEA had just over $5.72 billion of traditional reinsurance in-force and $2.27 billion of cat bond protection outstanding.

Since then, the traditional reinsurance component has shrunk, through to September 30th 2025, while the cat bond component has grown.

While risk transfer purchases overall have shrunk there is now discussion over whether some of the industry and member assessments that would furnish parts of the upper-layers of the CEA’s funding tower could be replaced, either with reinsurance or more catastrophe bonds.

Given how efficient cat bonds could be at those top-layers of the CEA’s tower, above where it has bought private market coverage previously, it will be interesting to watch how its arrangements evolve going forwards.

The overall risk transfer tower does stand slightly smaller still though, as the CEA manages its protection to meet its needs for limit, but given the three cat bonds sponsored in 2025 it suggests the insurer is finding conditions in the capital markets to have been more conducive for securing protection through 2025 so far.

Notably, the catastrophe bond market has helped the CEA lower its overall attachment point for reinsurance in the last year.

The June issuance, the $400 million Ursa Re II 2025-1 cat bond, has an attachment point at $1.7 billion of losses to the CEA.

In its latest board documents, the CEA noted that its reinsurance attachment level reduced from $2.1 billion to $1.7 billion in its last quarter of record, which has protected an additional $400 million of capital for the earthquake insurer.

At the same time, in 2025 the CEA reported a $70 million reduction in its risk transfer expenses as well, which is in part due to reduced limits being purchased, but also due to softer reinsurance market conditions.

The reduction in attachment points, as the CEA opted to buy coverage from the capital markets in cat bond form lower-down, did offset this somewhat, but it’s clear the insurer is finding great value in expanding its cat bond coverage right now.

This is particularly evident in the new catastrophe bond that priced this week, the $770 million Ursa Re II Ltd. (Series 2025-2) deal.

As we were first to report in our coverage on that pricing earlier this week, both tranches of notes offered have priced with spread multiples-at-market that are the lowest in the CEA’s history of sponsoring cat bonds.

Notably, there is an October 2023 issued tranche of one of the CEA’s cat bonds with a comparable initial expected loss to one of the tranches of this 2025-2 deal that priced this week and the spread multiple of the newly issued tranche is some 46% lower.

Spread multiples for the CEA’s cat bond issuances have been coming in over the last year and a half for the insurer, which has no doubt helped to drive some of the risk transfer savings. This latest cat bond, which is additional to the September 30th figures reported, will only continue that trend.

Looking ahead, for the CEA’s reinsurance tower, as we said the insurer has $505 million of its $2.61 billion of cat bonds scheduled to mature at the end of this month.

Which means, once this new $770 million issuance is settled and that maturity has occurred, the CEA will go into 2026 with $2.875 billion of catastrophe bond backed reinsurance limit available to it.

At the same time, on the traditional and collateralized or fronted reinsurance side, of the CEA’s just over $5.06 billion of cover at September 30th 2025, some $646.5 million was up for renewal as of October 1st this year, but we do not know at this stage how much protection the CEA bought from reinsurance market’s at that date.

For the CEA, the January 2026 reinsurance renewal will be a particularly big one for the insurer, as it has approaching $2.54 billion of its traditional reinsurance limit that expires on December 31st.

Meaning the CEA’s overall risk transfer, reinsurance and catastrophe bond tower could change significantly over the coming months and there is also a chance the earthquake insurer looks to the capital markets again.

Given the very strong price execution and the fact catastrophe bond investors have helped the CEA reduce its attachment points as well as delivering on the greatly reduced risk interest spreads required, there is every chance the CEA returns if it feels it can achieve a better outcome and multi-year collateralized cover by sponsoring additional cat bonds over the next couple of months.

The CEA has $2.61 billion of outstanding catastrophe bond coverage still in-force as of today, sitting 5th in our cat bond sponsors leaderboard.

When the new $770 million Ursa Re II deal settles on November 25th it will increase the CEA’s cat bond backed coverage to one of the highest levels it has ever stood at, of $3.38 billion, which will propel the CEA to the top of our cat bond leaderboard for a short time.

But then $505 million of cat bonds will mature at the end of this month bringing it back down to $2.875 billion of cat bonds in-force as of December 1st 2025, leaving the CEA back in fifth place again.

View details of every catastrophe bond sponsored by the CEA in the Artemis Deal Directory.

Cat bond market helps CEA reduce its reinsurance attachment point and costs was published by: www.Artemis.bm
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