Maintaining reinsurance attachment points equivalent to 20-30% pricing benefit: Berenberg

Keeping reinsurance attachment points stable at their current levels where they had been reset to during the recent hard market is seen as the most critical factor in reinsurance profitability, with analysts from Berenberg stating this is equivalent to a 20% to 30% benefit in terms of pricing.

Attachment points are seen as the most important factor for reinsurance renewal negotiations through the rest of 2025, according to equity analysts from the investment bank.

Looking ahead to the annual Monte Carlo reinsurance Rendezvous event in September, the Berenberg analyst team note that despite increased capital and capacity in the sector, so far this year terms, conditions and all-important attachment points are holding firm.

“We believe that strong attachment points are the key to the profitability of the reinsurers, and we estimate that maintaining their current level rather than allowing them to be cut is equivalent to a 20-30% benefit in terms of pricing,” the analysts state.

While reinsurance pricing has been softening, it is doing so from a position of strength.

Capacity is now exceeding demand, the analysts explain, with the majority of this coming from traditional incumbents retained earnings, while the insurance-linked securities (ILS) market is providing additional capacity growth.

“This likely ensures discipline can be maintained in terms of redeploying this hard-earned capital, especially when paired with the lessons of past periods of soft pricing. Terms and conditions (eg attachment points), which we believe remain firm, are crucial in the sustainability of the sector’s profitability,” the analysts continue to explain.

In fact, the analysts estimate that around 85% of incremental reinsurance sector capital build-up has come from the traditional market so far.

Capacity growth appears controlled so far, they explain and with catastrophe losses still high, although not slowing the softening of rates, the analysts believe this situation means terms and attachments can and should continue to hold firm.

“This capacity is coming from retained earnings of previous profitable years, which means that incumbent reinsurers are more likely to behave in a rational way, in our view,” the Berenberg analyst team further explains.

The analysts estimate that the ratio of capital to premiums will grow through the rest of the year, but with reinsurance demand seen to still be rising by a CAGR of around 10%, they do not feel the ratio will rise to levels seen in the last soft market, at this time.

The higher levels of profitability are being sustained by the higher attachment points, as reinsurers look to maintain the status-quo around risk-sharing between primary and reinsurance layers of the industry capital stack.

As the Monte Carlo event nears, this will prove critical to reinsurers results, as well as to ILS fund and investor returns. The industry is motivated to keep these attachments stable, which will be a key feature of negotiations as they begin and the end of year renewals near.

Join us at our Artemis London 2025 conference on September 2nd, where attachment points are certain to be part of the debate.