Capital rich, softening rates, big opportunity: the growth dilemma

The market is at an inflection point: it is profitable and awash with capital, yet downward pressure on rates means carriers need to make tough decisions on growth and need discipline. Equally, the wider picture is exciting: new risks offer significant opportunities, but also challenges, with data centres high up that list.

That was the overarching theme of a round table discussion held in Monte Carlo by  Bermuda:Re+ILS. It featured 10 seasoned Bermuda executives from carriers, brokers and service providers. A fast-paced debate spanned everything from data centres to casualty ILS to crypo insurers – but discussions began on market conditions.

Chris Dart, head of treaty reinsurance – Bermuda, Willis Re, started on a positive. He described a large amount of supply into the market and agreed a softening was taking place, but he stressed that it is from a very strong position.

He said changes previously made to retentions are holding and the performance of the underlying insurance books has also been very good. “Policyholders are retaining risk due to deductibles. People are making money. We are in a good spot. Having said that, there are active storms amid the pacific – there is also a lot of risk out there.”

Mahesh Mistry, senior director – head of analytics, AM Best, agreed the market was in a good place. He noted that many reinsurers and insurers have posted record profits in recent quarters and the ability to generate returns above cost of capital remains for most players. But he used the phrase inflection point. “We are seeing softening and are seeing tweaks to terms and conditions. There is a lot of capital, it is just a question of how it will be deployed.”

John Huff, president & CEO of the Association of Bermuda Insurers and Reinsurers (ABIR), also took a positive slant. He noted that carriers are still meeting the cost of capital and rates remain adequate, despite some softening.

He flagged the strong performance of reinsurers. Recent figures released by ABIR, showed Bermuda re/insurers generated $32.8 billion of net income in 2025, up 22.4% year on year. The increase came as total equity across the ABIR membership climbed 16.6% to $207.7 billion. “Reinsurers now have the luxury of choosing where to deploy capital – that is a good place to be,” he said.

“It’s that Bermuda triable of industry, government and the regulator that makes us so unique. You can mimic that, but no one can really emulate Bermuda.” John Huff

The wind can change

“We are still seeing terms and conditions holding – but that could change if it is another benign wind season. There is a lot of capital. People talk about cycle management and discipline, but everyone has to grow.” Chris Bonard

But some participants offered a different perspective. Brad Adderley, Bermuda managing partner, Appleby, noted that such strong performance was also partly on the back of three years of benign losses. A big loss could change this dynamic. Equally, he agreed that carriers will want to use excess capital. “So what will they do with that?” He said it does not take many players chasing growth to move the whole market.

Chris Bonard, group president, Price Forbes Re, agreed that a need for growth will be a defining driver of this renewals. “We are still seeing terms and conditions holding – but that could change if it is another benign wind season. There is a lot of capital. People talk about cycle management and discipline, but everyone has to grow.”

Matthew Britten, managing director with PwC Bermuda’s insurance and reinsurance group, also noted that reinsurers will be well aware of how retention levels have protected them from growing secondary perils. “Yes, it has been benign for reinsurers, but there have been a lot of insured losses driven by things like severe convective storms and wildfires. Reinsurers have avoided those but they are cognisant that weakening terms and conditions will change that.”

Renaud Guidée, CEO of reinsurance, AXA XL, made the point that in real terms, accounting for inflation, retentions are declining. He stressed that, at this point in the market cycle, what really matters is relationships with cedants.

“All cedants are different and it depends on the level of relationship you have with them. If you can clean up books, manage limits, that helps if there is a decline in rates. But at the moment, insurers and reinsurers are making their cost of capital. The market is healthy; the way the risk is shared on the value chain is quite balanced,” Guidée said.

“We need pricing adequacy in an environment where risks are increasingly complex. It is OK to have some variation but it has to sustainable. Let’s just try and be a trustworthy asset class and offer no surprises.” Kathleen Faries

Kathleen Faries, CEO, Artex Capital Solutions, took the opportunity to remind the participants of a key promise the industry had previously made to investors in more troubled times – that reinsurance could be a sustainable and profitable asset class long term. “It’s OK to have some variations but has to be sustainable long term or investors won’t be there when we need them. We need to continue to build trust and discipline.

“We need pricing adequacy in an environment where risks are increasingly complex. It is OK to have some variation but it has to sustainable. Let’s just try and be a trustworthy asset class and offer no surprises.”

Britten agreed that reinsurers have a dilemma due to excess capital. He noted that both growing in a softening market or buying back stock each present challenges at this point in the cycle. “There will be pressure from a governance perspective, so what do they do?”

Leonie Tear, an international regulatory specialist and partner in the Bermuda office of Walkers, agreed that governance will become an increasingly important issue in this environment. She explained that board members are increasingly being expected not just to exercise underwriting discipline, but show they understand the underlying risks in the context of whatever risk models or AI-based tools they might be using. “They will need to be able to explain what they are doing; how they rely on AI.”

Martin Henley, founder and CEO, mea Platform, agreed that the way carriers use technology and AI will become more important – and increasingly a competitive advantage for companies navigating tricky market conditions. “You might think the ability to leverage technology and AI to gain operational leverage and better use data would be a rising tide – in fact, it will not be equal.

“The companies that use it correctly will not do so to cut costs but to free up their experts to focus on better understanding risks. That is a huge opportunity and I anticipate capital will flow to those that do it right – those able to grab the opportunity and make it stick. They can gain a competitive advantage quickly. It can make a big different: impact the combined ratio, help understand risk, help on the capital side,” he said.

Casualty and emerging risks

The conversation then shifted to casualty business, of increasing interest to many players in the context of softening property rates, and the opportunities around emerging risks.

The consensus was there is more optimism around casualty now – despite social inflation and litigation financing continuing to offer challenges.

Britten noted that there had been less new adverse development in casualty, after quite a lot in previous years, but said he anticipates to see some in the last quarter – probably in lines such as commercial auto. “Most players have tried to get ahead of these issues, but maybe not quite enough. But I would still err on the side of caution due to challenges such as litigation financing.”

Mahesh Mistry, senior director – head of analytics, AM Best, said he remained concerned about casualty. He agreed there will be more adverse development, though recognised there has not been much reserve strengthening by carriers yet. He also noted the rating agency is seeing increased interest in casualty sidecars, which he described as interesting but also complex and bespoke and done on a case-by-case basis.

Faries at Artex agreed there is growing interest in this space. She said investors who have previously been in property-cat are taking an interest. But she also agreed it is highly complex and very sophisticated legal structures are needed to ensure there is certainty for all participants over the lifetime of a deal.

“We are trying to ensure that things are done properly and it is sustainable,” she said. “It is exciting to be working with different investors on a new line of business, but it will take continued thought to get it right. We want everyone to be happy in 10 years. If things go wrong, people need clear exit options. You have to structure it in that way from the start.”

Tear agreed that this approach is important so that there is no trapped capital. Adderley and Bonard also said they are seeing more interest from investors in sidecars – for many lines of business. Adderley also said he is noticing more interest in crypto – both in insuring it and as collateral in insurance deals.

This prompted the discussion to move into other types of emerging risks and cyber; AI and data centres were the main areas covered.

Guidée described cyber as a potential big revenue generator but also argued clients remain unwilling to pay adequate premiums for the risk. He suggested the cyber market needs a big loss, its own version of Hurricane Andrew, to change perceptions.

Tear agreed saying that many insurers and reinsurers feel they do not have enough data to price it properly. “For that reason, we are seeing more captives being formed as companies insure their own risk,” she said. “But I think innovative insurers will come into this space.”

Dart and Bonard discussed the emerging risk of data centres. Dart noted how these require a number of forms of insurance; also, the values are very high, meaning potential concentration risk. “It is a huge opportunity, though,” he said.

Britten posed the question as to whether Bermuda was well positioned to help with the challenge of insuring data centres. He admitted there are challenges – but with huge exposures there would also be opportunity.

Guidée said Bermuda has the talent and the ability to attract capital. Huff reminded the participants of how agile Bermuda is – and how important it is to have a good and well-resourced its regulator. “It’s that Bermuda triable of industry, government and the regulator that makes us so unique,” he said. “You can mimic that, but no one can really emulate Bermuda.”

First Published in Intelligent Insurer, September 2026