Negotiating power in property reinsurance has been swinging towards buyers since the 2023 hard market, but brokers pushing for more should watch for one clear warning sign, according to David Duffy (pictured), global property leader at Marsh Re.
Duffy was appointed to the newly created role in August after 34 years at the reinsurance broker, formerly Guy Carpenter. Speaking to Insurance Business as the market begins to position for January 2027, he said leverage has continued to move towards cedents, but there is a point at which demands on price and coverage can outrun available capacity.
The shift in negotiating power has developed progressively since the perceived scarcity of reinsurance capital around the 2023 renewals. It is not because catastrophe losses have disappeared, Duffy said, but because a greater share is being retained by primary insurers rather than reaching their reinsurance programmes.
"Prior to 2023, we would typically have seen reinsurers cover 20% of the industry's global insured cat loss bill each year. That number's dropped to 12% since 2023 forward," he said, adding that the trend held even through severe events such as the Los Angeles wildfires.
That change helps explain why reinsurers are producing materially stronger combined ratios than many of the insurers buying their protection, a divergence seen in recent half-year reinsurance results. It also gives buyers more room to negotiate as market discussions develop. For Duffy, that negotiating room has further to run.
"There is some risk-adjusted rate reductions out there for insurers in 2027. They may not be quite the same quantum as what was seen in 2026, but they will be significant," he said.
Price is only part of the negotiation. Duffy pointed particularly to what has happened to retentions since the hard market.
"What we have seen in those retentions is they've stayed the same, generally speaking, in nominal currency terms, and that has meant, as we have seen inflation growth and valuation growth, that you've seen a steady erosion in the probability of those programmes attaching," Duffy said.
That creates scope to look beyond headline rate reductions at how programmes are structured and where clients are retaining risk, as renewal conditions have already begun recalibrating across pricing, terms and capacity.
Reinsurers are also showing more flexibility on where they set those retention floors, according to Duffy.
"They're not going to be didactic and set firm hurdles on – I won't support anything below a certain level," he said.
Duffy's clearest test of how far the softer market can be pushed comes down to whether the placement can actually be completed.
"A sign that things might have gone too far, or an individual client has asked more than the market can offer, is when you can't clear that target coverage at the target price," he said.
That puts a practical limit on the negotiating leverage created by softer conditions. Lower rates, broader coverage or changes to programme structure only deliver value if the required capacity remains available.
If a programme cannot clear at the combination of price and coverage being sought, the market has effectively set its limit.
The changing sources of reinsurance capital can make that boundary harder to predict. Duffy pointed to the increasing fluidity of investor capital moving in and out of the sector as one factor making the market "more interesting and maybe at some level less predictable."
Moody's has similarly pointed to further softening at January renewals, while expecting reinsurers to maintain discipline around terms and attachment points.
Softer conditions are creating more room on price, structure and coverage, but only while capacity follows. Once a programme can no longer clear on the terms being sought, that negotiating room has reached its limit.
