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KBRA says wider aggregate and ILS options are strengthening insurers
KBRA cautioned that cheaper, more available reinsurance and cat bond capacity will remain credit positive only if insurers preserve risk-adjusted pricing and prudent retentions.
In a softening reinsurance market with abundant capital, KBRA said primary insurers are seeing more ways to transfer risk, including traditional reinsurance, insurance-linked securities, and a renewed availability of aggregate covers.
The rating agency described the broader menu of protection as “a strength” for carriers, even as it warned that underwriting discipline should not slip as protection becomes cheaper and easier to access.
KBRA said reinsurance rates are still well above the soft market lows of 2017, and that strong growth in alternative capital has pushed traditional reinsurance capital to new highs, which has also increased appetite for risk in lower layers of reinsurance structures.
Looking ahead, KBRA pointed to signs that aggregate and multievent covers are returning ahead of the 2025 hurricane season, and it said that lower reinsurance costs are credit positive only if cedants maintain risk-adjusted rate adequacy, prudent retentions, and manage counterparty, reinstatement, and exhaustion risks.