AM Best ringfences broker facilities as ‘net credit negative’ risk

Credit rating agency AM Best has identified broker facilities as “a net credit negative” global risk facing the re/insurance market, flagging that “reduced underwriting control” is a “primary concern” around these partnerships amid soft market conditions.

This was the view shared by Greg Carter, managing director of analytics for Europe, Middle East and Africa (Emea) and Asia Pacific at AM Best, during a briefing event held at the Hotel Hermitage as part of 2026’s Rendez-Vous de Septembre conference (6 September 2026).

Highlighting the key global risks identified by AM Best in the run up to this year’s Monte Carlo-based conference, Carter pinpointed broker facilities – an agreement between a re/insurer and broker whereby the broker is given authority to automatically bind or allocate a defined portion of risk or capacity under pre-set terms – as “a net credit negative” risk that could weaken reinsurers’ financial strength in today’s soft cycle.

For him, the crux of this risk comes down to “reduced underwriting control”.

He explained: “Reduced underwriting control is our primary concern. There [are] some risks around aggregation and concentration as well, possibly higher commissions.

“[But] that delegation gives limited customer visibility and with that, you raise issues around governance and potential regulatory scrutiny. From our perspective, we see that delegation of underwriting – particularly in the softening market – as a net credit negative.

“If you’re an underwriting entity and you delegate underwriting control in any way, shape, or form, you introduce risk that you do not actually control.”

Carter did not dismiss broker facilities out of hand, however.

Despite being extremely cognisant of the risks these partnerships may pose (re)insurers, he added that “there are many benefits that are an attraction to companies” too.

He continued: “For certain underwriters, it gives them far more access to larger volumes of business. It can bring operational efficiency for those companies.

“Clearly, it will strengthen the relationship with [facility] brokers, but it also gives access to specialist expertise and niche parts of the market that that underwriter would not be able to access [otherwise].”

Risk landscape

Alongside broker facilities, Carter ringfenced a number of other key risks that have the potential to impact the current reinsurance market.

This included geopolitical uncertainty – particularly concerning US president Donald Trump – macroeconomic uncertainty tied to inflation and interest rates, climate risk and especially rising temperatures, artificial intelligence (AI) and emerging liability areas.

These new liability areas had crossover with the risks Carter had already flagged, as he additionally highlighted AI decisions, output and discrimination, autonomous system associated losses, climate risk and fast paced cyber developments as emerging liability risks for reinsurers.

For Carter, not all of these risks have a downward trajectory. For example, he believes “the industry is very well equipped at dealing with geopolitical uncertainty and evolving rapidly”.

He clarified: “It’s not that geopolitical uncertainty doesn’t affect the industry at all. It does have very clear tangible impacts, but the industry does respond very quickly.

“I think you can see that from the fact that marine insurance continues to be available, maybe not at the price that people want, but it does continue to be available and the industry has evolved.”

Speed of sharing?

Leading on from Carter’s comments on broker facilities, AM Best panellists also discussed reshare facilities, where part of an insurer’s reinsurance programme is pre-placed. This model suggests that outwards reinsurance approaches would then be faster to place.

Mathilde Jakobsen, senior director and acting head of analytics at AM Best, predicted that more reshare facilities would come to fruition.

She told attendees: “The benefit [to] the primary companies is clear, right? They have more power. They don’t need to place quite as big a programme. We might see more [uptake of these kinds of facilities].”

Fellow panellist Mahesh Mistry, senior director and head of analytics in London at AM Best, added: “Also, it depends because there’s various facilities out there. Some [have a] broad array of products. Some are very specific.

“I think for those that lead, they have more control. Those that don’t lead have less control. Some the commission or the brokerage is more, but the actual expense to the insurer may be offset by some of that. So, there’s a few things to consider.”