By Michael Jones

Oct 22 - (The Insurer) - Conversations at this year’s Baden-Baden Reinsurance Meeting spanned questions around risk sharing between cedants and reinsurers, softening in the property catastrophe market and the extent to which reinsurers will grow into a rate adequate but uncertain casualty space.

The event began with panellists at Guy Carpenter’s Reinsurance Symposium discussing how risks should be shared between the direct and reinsurance markets. Hannover Re CEO Clemens Jungsthöfel suggested that to manage this outcome sustainably, we must ask: “Where is the equilibrium?”

This question was to serve as a central theme in many of the discussions at the event.

Brokers have pointed towards the reinsurance market's stellar results in 2023, 2024 and, assuming no further major losses, 2025 too.

They suggest that given this period of strong performance, and the accompanying circa 20% returns on equity, the market must rebalance itself to ensure what they would frame as a fairer distribution of returns between cedants and reinsurers.

While reinsurance market sources acknowledged the excess capital resulting from positive performance and consequent availability of capacity, many suggested the narrative around the imbalance between cedant and reinsurer results was overstated.

One (re)insurance market analyst told The Insurer that although reinsurers have delivered strong results in recent years, it was only in 2025 that the sector reached parity with the direct market on a rolling five-year ROE average.

Discussions about rebalancing have focused on structures, both in terms of attachment points and the broader re-introduction of aggregate and frequency products.

Multiple reinsurance market sources said there is little scope for downward movement on attachment points for European property cat business.

This was affirmed by MS Reinsurance international chief underwriting officer Andy Hottinger, who said: “I do not expect major shifts in attachment points.”

Multiple sources suggested there is appetite from the reinsurance market for frequency and/or aggregate products in European property cat, albeit they said that it had to be at an adequate price.

Rhetoric around aggregate and frequency products to control earnings volatility for cedants continued from the broking market.

But another senior reinsurance market source suggested that while they entered Baden-Baden with the expectation brokers would propose a number of aggregate products for European cat renewals, they were surprised that this had not been the case during their meetings.

SOFTENING ANTICIPATED IN EUROPEAN CAT

Price is also set to be a point of contention in European cat renewals, with both broking and reinsurer sources in Baden-Baden affirming expectations that rates will come under downward pressure.

Prior to the conference, executives at Aon and Guy Carpenter said they expect double-digit softening in the European property market at January 1 renewals. Reinsurance broking sources on the ground at Baden-Baden said that 10% to 15% risk-adjusted rate reductions were anticipated.

Expectations for downward pressure were also affirmed by reinsurers. MS Re’s Hottinger said there remained strong supply for commoditised risks, which has resulted in a softening of pricing in these areas.

Two senior international property treaty sources told The Insurer they had arrived in Baden-Baden anticipating negotiations to focus on reductions of flat to 5%. However, both suggested that early discussions suggested larger risk-adjusted decreases than this.

Softening was the status quo for almost all regions and perils according to sources at the conference. However, one senior reinsurance market source said they thought Italian hail, flash flood and earthquake could hold firm.

CASUALTY GROWTH AMIDST UNCERTAINTY

Casualty discussions positioned continued uncertainty around U.S. liability exposures in European programs and the prospect of an uptick in litigation against a segment broadly perceived as rate adequate with a greater supply of capacity than demand.

Delegates on the ground reaffirmed views expressed ahead of the conference by reinsurers including Swiss Re, which suggested European legislation around class action laws will have a “material knock-on effect” in casualty lines.

Despite caution around international liability programs with sizeable U.S. exposure, most sources described a market where reinsurers are expecting to grow.

Two reinsurance broking sources said that the market, after a period of remediation in both insurance and reinsurance, has reached a point where almost every segment is rate adequate. One of these sources said the only area where this was not the case is excess trucking in the U.S.

In this context, reinsurance market sources on the ground said they expected to grow into casualty treaty, with capacity to meet cedant demand.

Single-digit softening across the market appeared to be the wide consensus.

But sources said that given many of the market’s larger players had been burnt by casualty in recent years, any softening will be conducted at a measured pace, alongside conservative reserving expectations and with little appetite for movement from the status quo of smaller line sizes in 2026.

Unlike the market in Bermuda and North America, sources suggested the trend of casualty sidecar launches was not as prevalent in Europe.

One reinsurance broking source said this was partly a reflection of the alternative capital space being more developed on that side of the Atlantic, albeit reaffirming that the development of these products is important for the expansion of the casualty ILS space.