Reinsurance market is nearing a ‘breaking point’ as competition intensifies

Record capacity is breeding confidence, but MS Re’s Jörg Bruniecki warns the real test will be what capital remains available, and which partners remain committed, when significant losses materialise.

Key points:
Pricing is nearing the floor
FOMO is fuelling property competition
Quality and permanence of capital is key

Reinsurance capital may be at an all-time high, but assuming it will all remain available when the market turns would be a mistake, according to MS Reinsurance’s Jörg Bruniecki. He argues that clients should look beyond capacity available at the next renewal and consider the quality, commitment, and staying power of the partners on their panels.

“There is definitely an abundance of capital in the market,” Bruniecki, chief underwriting officer at MS Re, told Monte Carlo Today. But what differentiates providers, he argued, is “the quality of their capital and, alongside that, the permanence of their capital”.

Traditional reinsurance balance sheets have grown, while investors are also entering or returning through ILS, catastrophe bonds and sidecars. But Bruniecki cautioned against assuming all that capacity will behave in the same way when the industry experiences cycle-changing losses.

“Third-party capital access is not a cure-all solution,” he said. “It is certainly a valid and important part of the market, but access to capital at a single renewal date is not the same as having a committed counterparty through changing conditions”

A false sense of security

Bruniecki sees recent experience already influencing behaviour.

“Record levels of capital follow an unusually benign period for insured cat losses” he said. “This is creating a false sense of security in the market.

“A softer market does not mean a safer world.”

The relative absence of major hurricanes since 2023 has added to that confidence. “We are seeing classic recency bias at work. After a few years without a major loss event, many are treating recent experience as the new norm and discounting the lessons of long-term history.

He sees fear of missing out adding to the pressure.

“FOMO has driven the current dynamics in the property market, fuelled by this over-confidence it could never go wrong,” he said. “But catastrophe risk has always been cyclical, and markets can quickly be reminded of that reality.”

That matters because a softer market does not mean a safer world. 

The absence of a market-changing catastrophe does not mean the underlying risk has disappeared. Exposure to severe loss events, secondary perils and longer-tail uncertainties remains very real. At the same time, the economics are becoming less forgiving. Pricing is moving towards technically adequate levels, Bruniecki said, with some areas already below them.

“We’re nearing a pricing floor,” he said. “And as the market becomes tougher companies still have to demonstrate that they can grow.”

That pressure could contribute to further consolidation across the insurance and reinsurance market, he added.

“We are reaching the point where, from a technical perspective, returns are getting closer to the cost of capital. We are therefore much closer to a breaking point. The excess margin has been squeezed out and the rules are changing.”

Who stays through the cycle?

Bruniecki emphasised that abundant capital makes the distinction between available capacity and long-term partners even more important.

“As the market shifts, this is the test: do you genuinely act as a long-term partner, or were you simply there when the market was very hard? Can the client rely on you to provide consistent capital over the longer term?”

For Bruniecki, the construction of a reinsurance panel is becoming increasingly important. In a market where capacity is abundant, and buyers have choice, they should think not only about price, but who understands their risks and will be their strategic partner over the long-term.

Clients, Bruniecki added, can also accept difficult decisions.

“Clients do not mind receiving tough messages if those messages are delivered early, are consistent with your behaviour and are embedded within a clear strategy,” he said.

“A strategy that is not executed is just a piece of paper,” Bruniecki said.

“The difficult message is that we need to find a compromise that works for both parties. It is a testing period because strategic partnerships require both sides to deliver their part to make the relationship work.”

Recency bias can distort growth decisions 

Maintaining discipline is complicated by a disconnect between the results boards see today and the market underwriters are actually writing.

Underwriters look at underwriting years; boards tend to focus on financial-year results. Bruniecki cited engineering, where strong underwriting years from several years ago may only now be producing attractive financial results even though current conditions have moved beyond their peak.

That can create pressure “to do the wrong thing at the wrong time”.

“The perfume of premium is often just too alluring,” Bruniecki said, adding that the challenge is to maintain a forward-looking underwriting view when reported results may still reflect business written under much stronger conditions.

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