Reshaping marine reinsurance: why composites and aggregates are back in fashion

Excess capacity is creating both pressure and opportunity, and the challenge for reinsurers now is to differentiate themselves in a crowded field.

Key points:
Excess capacity spurs fresh innovation
Composites regain confidence post-Ukraine invasion shock
Aggregates offer bespoke earnings protection

So says Joshua Parker, divisional director in Gallagher Re’s marine and energy reinsurance team, who told IUMI Today that competitive pressure was bringing composites and aggregates back into focus.

“There’s been an acknowledgement from many of the reinsurers we work with that there’s a lot of capacity in the market, and if they want to meet their growth ambitions, they partner with us to explore how they can grow with clients and add value,” Parker said.

That competitive jostling is spurring fresh innovation. “It’s not been a case of reinsurance appetite distinctly changing. It’s a positive step forward about how we can try and grow books,” he added.

Composites were the first to feel the squeeze. The invasion of Ukraine by Russia became an unwelcome stress test, exposing how these products, often bundling core marine and energy with non-core exposures such as downstream energy, political violence, terrorism and aviation war, could quickly unravel under extreme conditions.

“When Russia invaded Ukraine, a lot of potential loss was from the perceived non-core exposure rather than marine composites,” Parker recalled. Reinsurers reacted sharply at the January 2023 renewals, stripping out aviation war and strikes, riots and civil commotion (SRCC)/war-on-land covers, while simultaneously pushing up prices.

Two years on, the feared tidal wave of claims never arrived. Confidence has crept back into the market. “There’s been renewed confidence in the composite product. The losses that came through haven’t been the same quantum that the reinsurance market was expecting,” Parker said.

“We very much see composites as a long-term product.”

That recovery owes much to brokers and cedants. “Brokers have worked closely with clients and reinsurers in getting a better understanding of those risks, quantifying their exposures and improving the way the data’s been presented.” Stronger data, improved modelling and more transparent conversations have helped restore trust.

The result: non-core lines are edging back into composite programmes, with more likely to follow in the near future.

Economics also favour composites. “The composite product by definition includes multiple lines of business in one contract. If those lines were bought independently, there would be a minimum cost or rate online, so they would be more expensive than if all bundled into one product,” he said.

“We very much see composites as a long-term product that will be part of a long-term buying strategy, and one that will continue to evolve with client needs.

“Going into 2026, we’re looking to continue benefiting from an improved understanding and appetite to work with clients, and to include some of the other non-core lines of business.”

In his view, collaboration between clients, brokers and reinsurers is “stronger than ever”—a foundation that will keep the product evolving.

Customised solutions

Aggregates, meanwhile, are enjoying their own resurgence. Reinsurers eager to deploy surplus capital are turning to increasingly customised solutions.

“There is an increased supply for reinsurance capacity and a lot of following markets with appetite to grow their portfolios. One innovative way they’re looking to work with Gallagher Re is to design bespoke aggregate solutions,” Parker said. He expects this momentum to build steadily as confidence spreads.

Cedants have good reasons to explore these structures. Events such as the March 2024 Baltimore bridge collapse, Russia-Ukraine losses and aviation claims, although headline-grabbing, were not market-wide capital shocks. Instead, a steady rise in medium-sized losses, often in the $500 million to $1 billion range, has highlighted the value of earnings protection over traditional cover.

“Purchasing those aggregate-type protections is better suited to the dynamics that we see within those books of business,” Parker stated.

Aggregates add another layer of efficiency to the composite, Parker argued. “It allows us to keep the diversification benefit that clients have within their specialty portfolio, gives them confidence in protecting their earnings and allows them to buy a product they had not previously thought was necessary.”

For Parker, these structures are not passing fads. “The composite product has been around for a long time. It’s never left the market, it’s just had different iterations,” he said. With new specialist reinsurers arriving and Gallagher Re’s integrated teams across marine, terrorism and energy working in tandem, he is confident the appetite will endure.

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