Client selection, structure: TransRe focuses on what it can control

Market dynamics of supply and demand will almost inevitably determine price; the best carriers will focus on things they can better control: client selection and the structure of deals, including terms and conditions.

That is how Eyal Shnaps, global property portfolio lead at TransRe, describes TransRe’s approach in the context of the market continuing to soften. Speaking exclusively to Monte Carlo Today in a video interview in the context of the mid-year renewals, and learnings as the industry moves towards the year-end renewal, he said it is important for reinsurers to focus on what they can control – and to be disciplined in these areas. Click here to watch the full interview.

“Our number one priority is client selection,” he said. “We want to work with long-term partners we can trade with through the cycle. Second, we focus on structure. For example, on cat business, we target mid- to high-end attachment points. We’re offering a AA+, Berkshire Hathaway-backed balance sheet. Our offerings are relatively less valuable and we don’t have the same competitive advantages at lower attachments. Pricing comes third in our priorities. We recognise the market determines the price. It is what it is. It either works or it doesn’t.”

Gaps filled, rates soften

Shnaps, whose early career was in risk modelling and analytics and initially joined TransRe to develop their ILS strategy, acknowledges the market is softening. The mid-year renewals largely saw a continuation of a trend set out in the January 1, 2025 renewal.

“The trend was pretty similar,” he said. “We continued to see new demand. The significant inflation in 2022 to 2024 produced a need for additional reinsurance limit. The market was really hard in 2023 —at that point, new limit was expensive and hard to place. Now, we’re seeing our clients continue to fill those gaps in their programmes. Also, in Florida, Citizens has been depopulating, creating a need for reinsurance there. So demand has been strong.

“There’s been a lot of new capacity, too. Balance sheets are strong. We’ve had a couple of years of solid earnings. ILS capacity has been high. As a result, we saw rates soften by high single digits, maybe 10% for non-loss-impacted programmes. It was less pronounced for loss-hit programmes: we had hurricanes Helene and Milton last year and the wildfires in January.”

As a result, there has been a repricing for programmes that were affected, in particular for wildfire. There’s been a recalibration exercise taking place for wildfire, he noted. “But overall, there is certainly some softening.” But he stressed that should not mean carriers need to lower their own underwriting standards, and compromise on profitability. “That is why we have the priorities we have in the order we have them.”

Florida v California

One interesting nuance to the recent renewals has been the contrasting situation in Florida compared with California. The former became a no-go zone for carriers for many years due to its litigious regime and claims inflation. But a raft of regulatory reforms, including abolishing one-way attorney fees and assignment of benefits, have transformed the state.

“It’s probably too early to declare victory but in the aftermath of Hurricane Milton we saw far less runaway adjustment expenses and claims inflation. There’s clearly an improvement and the market is responding accordingly. Capital is flowing back into the state. You’re seeing new startups in Florida. Citizens is de-populating. Those policies are coming back to the voluntary market.

“It’s just much healthier and was treated accordingly in the June renewal. It was a lot more orderly. Capacity was there, and there were some rate reductions.”

In contrast, California is an increasingly difficult market for reinsurers. Losses have spiralled in recent years and regulation makes it difficult for carriers to increase rates as required. As such, many have pulled out putting pressure on state-run back up insurance schemes. “The market has been in distress,” he said.

There are signs of change in the pipeline. Severe losses from the January wildfires represented something of a wakeup call to regulators, he claimed. As such, some reforms have already come through. An emergency rate increase has been filed, subject to a public hearing. Insurers can also now use risk models and reinsurance costs as part of their rate filing. “They are overdue; companies want to support California but changes are needed,” he said.

He added that there were also other lessons learned from the fires. An inconsistency emerged between the way wordings were treated by different clients. His message to clients is simple: “We just need clarity. We’re flexible in accommodating the coverage that our clients need, but in order to price this business properly, in order to allocate capacity, we just need to know how these wordings work. Understanding that challenge was something of a silver lining.”

Another issue that emerged was undervaluation. He noted this had been a big topic in 2023 and 2024. While progress was made, the fires illustrated there is still work to do. “We've seen losses well in excess of the stated value, covered under a blanket limit. Another concern was the quality of some of the modelling data. In some cases the data was very old and unreliable.”

He also noted that, despite capacity flowing back into the market, reinsurers remain wary. “It doesn’t feel like there’s any intention to pull back, but the results from 2017 to 2022 are still fresh in people’s minds. At a certain point, if the ROE isn’t there for property, there is a threshold. Below that point, capacity will pull back.”

But he reiterated TransRe’s long-term, client selective approach. “We recognise the market is where it is. Price will be determined by the market. We see our job as being consistent partners to our clients. We’ll be here. The Berkshire Hathaway balance sheet will be here.”