Despite a volatile period of thorny, complex and unresolved claims, specialty reinsurers remain optimistic about the health of the marketplace.
Indeed, as negotiations kick off for the crucial January renewal season, a surplus of capacity and appetite for growth look likely to add downwards pressure to rating, despite material uncertainty about where the bulk of aviation war claims from Ukraine will land.
Reinsurers continue to view the core specialty classes of marine, energy and aviation as valuable diversifiers of their nat cat and casualty portfolios.
And, given the substantial alterations in coverage and price at 1 January 2023 following the outbreak of war in Ukraine, there has been attractive margin to be made in specialty business, attracting new entrants and fuelling growth ambitions from incumbents.
This year has seen new capacity from the likes of Mereo, Oak Re and Rokstone entering the market.
While new entrants naturally add to competitive pressures, sources said an appetite to grow from existing players was just as influential.
“The results for 2023, 2024 and 2025 have been pretty compelling, so we don't see any change in that drive for growth ambition throughout 2026,” said Nick Croxford, head of marine, energy and aviation at Gallagher Re.
“That just continues to add weight to the excess supply of capacity, and excess capacity influences pricing in a positive way for buyers.”
As competitive pressures mount within the segment, coverage inevitably becomes a subject of discussion, as well as price.
It is here where reinsurers appear to be more determined to hold their ground.
Broad composite deals were once a mainstay of the specialty class, but the scope of coverage left reinsurers badly burnt by the Ukraine loss event.
“We should not repeat that same mistake,” said Christian Silies, head of global specialty reinsurance at Sompo International.
“Retention and price matters for cat underwriters, particularly with respect to where their clients attach. For specialty, it is more about the scope of cover. Everything else after that should be the subject of a client conversation.”
And following the material uncertainty around the Ukraine claim, underwriters are also looking to add clarity to event wordings.
“One of the things I would like to see more of, and we will be pushing for, is a bit more clarity on event language and definitions,” said Olly Goodwin, global product head of specialty re at Aspen.
“This has come up in the past, and we have seen this with the Russia/Ukraine aviation losses, so we need to have event language that is fit for purpose, particularly when there are multiple coverages afforded.”
While the broad direction of specialty pricing is expected to be downwards, there are segments of the portfolio which may prove outliers.
Given the torrid period of loss activity for the aviation market this year, reinsurers are looking to take a firm stance on aviation reinsurance renewals, and push for pricing increases.
The coverage conversation
The Ukraine loss was the catalyst for the unbundling of composite coverage at 1 January 2023.
Aviation war and political violence reinsurance was often bundled into wider marine and energy treaties for minimal additional premium.
Underwriters appear determined to defend the coverage structures that have since been established. However, the competitive dynamics at play indicate brokers are likely to push for gradual expansions of coverage.
“The wind is blowing behind the composite sail. Where it got broken up in 2023, we’ve stared to see a few more product classes roll back in in 2024, so let's see,” said Gallagher Re’s Croxford.
Given the levels of competition, brokers said working on more innovative product offerings that serve the needs of clients was one way reinsurers are looking to win business.
Even spiky claims such as Ukraine or the Baltimore Bridge are not at a scale to cause major capital erosion for carriers, but frequency is increasingly viewed as the factor that can cause issues in a direct specialty book.
“You have a wealth of capacity [providers] who want to offer the same product as their neighbour,” said Croxford.
“The clever reinsurers are beginning to offer products that are more what clients want to buy and we want to sell, so not just looking at severity, looking at frequency type products as well.”
Ongoing Ukraine uncertainty
The war in Ukraine sent shockwaves through the specialty space, but despite Russia’s invasion beginning in 2022, there is still no clarity about the ultimate split of the claim between the direct and reinsurance market.
In June, Justice Butcher’s ruling in the UK High Court found Russia’s mass seizure of aircraft should be paid by the aviation war, as opposed to the all-risks, market.
This took the overall resolution of the claim – which sources estimate will cost the (re)insurance market around $9bn – one step closer to completion.
However, when it comes to reinsurance recoveries, the picture remains murky.
Details of reinsurance claim discussions remain closely guarded, but the expectation among sources is that the 1 January renewal will be completed without any clarity of the loss split.
It is understood that relatively few insurers have formally presented their reinsurance claims from the event, as they evaluate how they expect to make recoveries.
As this publication explored in the case of Atrium, a major participant in the aviation war market, the loss event is likely to test wordings, and some insurers may attempt to claim twice on their excess of loss coverage.
Aviation under strain
It has been a disastrous year for the aviation class of business.
Despite a sting of major loss activity in the market, direct insurers are still battling fiercely over business and there has been limited traction on rate rises.
Loss events include the Air India crash in June, which insurers have reserved at $410mn, and the American Airlines crash in Washington in January.
There is an element of uncertainty about the resolution of both claims.
In the case of American Airlines, negotiations are underway with the US government which could significantly reduce the payment from insurers.
Meanwhile, there is a possibility that the Air India crash could shift from the all-risks market and impact hull-war underwriters.
MS Amlin CUO Martin Burke said the lack of clarity was mitigating against the market immediately responding to the claims.
“In the absence of resolution, the market’s traditional approach on these things is normally to push the issue forward, and not always immediately react to something where it's not clear,” he said.
With an anticipated unprofitable year in the direct market, reinsurers are looking to respond, especially given a lot of reinsurance coverage is done through quota share.
“Aviation reinsurers and insurers don't need to rely on an aviation Russia/Ukraine argument to push for rises,” said Sompo International’s Silies.
“There are sizeable aviation incidents in the market as we speak, and all happened within the last 12 months. Much of that is quota share so the connection is pretty direct. There is a need for more rate in that market, full stop.”
Howden Re noted in a recent report that, at 1 July, first-tier XoL and retro pricing was generally flat, but the American Airlines claim could cause repricing across programmes.
The broker predicted the aviation reinsurance environment would be “more cautious” in 2026.
A healthy market
Despite the wealth of complexity dominating the specialty market, and its inextricable link to the torrid state of current geopolitics, there is a general sense of optimism heading into the renewal.
While rate reductions may be on the cards, reinsurers observe that pricing is coming off historically high levels with strong adequacy.
The priority is to defend market share in a competitive arena while also holding on to hard-won profitability.
After all, specialty business will only remain an attractive non-correlating diversifier of cat and casualty portfolios if it continues to underwrite profitably.
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