Capital, volatility and growth: Guy Carpenter dissects Asia’s big themes

In a rapidly evolving reinsurance market, it’s not about avoiding the storms but rather navigating them. Tony Gallagher, chief executive officer of Guy Carpenter’s Asia-Pacific region, offers a candid, clear-eyed view of the opportunities and challenges shaping Asia-Pacific renewals as the industry heads into 2025.

His perspective isn’t rosy, but it isn’t bleak. Instead, it’s measured—an analysis of where the market stands and where it’s heading. And he identifies three strategic challenges carriers must carefully manage: capital, volatility, and growth.

“We’re in a very different position from this time last year,” Gallagher told SIRC Today. Reflecting on market dynamics, he explained how the sector is transitioning. “There’s a lot more capital available in the marketplace compared to 12 months ago.”

Yet, despite this liquidity, “demand is somewhat similar to the prior year, but structures have changed significantly—retentions have increased, and proportional treaties have undergone substantial shifts”.

These adjustments have led to what Gallagher describes as “good results for reinsurers across the 2023 and 2024 market cycle”.

However, he cautioned, “the frequency of events, such as floods and windstorms across Asia, continues to increase” even if their severity has, in some cases, been lower.

“Many of the losses across Asia-Pacific have been insurance events, more than reinsurance events,” he said, pointing to insurers’ increased burden of such risks since many retentions increased.

“There’s a lot more capital available in the marketplace.”

Ever-changing risks

A major theme running through Gallagher’s analysis is the “changing nature of risk”. Whether it’s the advent of electric vehicles transforming motor claims or the broader impact of climate change on natural disaster frequency, he emphasised the need for continuous reassessment.

“When you look at these evolving risks, you look at your original portfolio and ask: ‘Is this structure still fit for purpose? Do we have the right reinsurance structures, the right original pricing, the right coverage in place?’.

“The question is not rhetorical—there will be discussions around retentions, structures, and whether pricing is right for the business,” he said.

With regard to renewal negotiations, Gallagher expects reinsurers to adopt a practical approach. “They’re happy to discuss and look at businesses that are performing well,” he said. “But for businesses that haven’t been doing so well, different discussions will take place.”

Each of Gallagher’s dominant themes for 2024 holds unique implications.

“Capital regimes vary across countries,” he noted, highlighting the increasing pressure on carriers to ensure sufficient capitalisation. “You may see consolidation, even mergers and acquisitions, as companies strive to meet these demands,” he said.

Volatility is also a pressing issue. “2024 is about retained volatility,” Gallagher stressed. Higher retentions mean that insurance companies, rather than reinsurers, are shouldering more risk – and more losses.

Then there’s growth, a topic he finds equally significant. The pressure is on. “How do companies actually grow their businesses?” he said. Cyber insurance remains a significant area of focus, but Gallagher also sees potential in the growth of managing general agents (MGAs).

“Many of the losses across Asia-Pacific have been insurance events, more than reinsurance events.”

MGAs: here to stay

“We’re helping many insurers partner with MGAs as a way to grow, especially in specialty lines,” Gallagher explained. This trend, he believes, isn’t going anywhere: “MGAs are here to stay,” he asserted.

MGAs have long been a feature of markets such as Australia and Hong Kong, but the concept is spreading. “Across Asia, more companies are looking at MGAs as a way to grow,” Gallagher said.

“Large insurance companies focus on large pieces of business, which they should do. But this also means that some specialist areas might be better handled by MGAs or insurance-like vehicles, which deliver tailored products with insurer backing.”

Gallagher addressed the scepticism MGAs have sometimes faced. “Historically, they were seen as cheap distribution,” he said. Now, however, their role has matured. “This is about expert-driven, capital-light innovation. The alignment suggests they’re here to stay.”

Stable renewal ahead

On the broader outlook, Gallagher struck a note of cautious optimism. “2023 was fraught with unexpected challenges, but 2024 seems more predictable. I see a more stable renewal,” he said.

Nevertheless, pricing will be a sticking point. “There’s excess capital, which creates pricing pressure on portfolios that are performing well,” Gallagher admitted. Yet he’s pragmatic.

“For areas with recent losses, prices may continue to adjust upwards. There’s more risk appetite this year than last year,” he added, citing strong results across Asia-Pacific. “But the companies with good risk management and a deep understanding of their portfolios will be best positioned for successful renewals,” he concluded.