Softening continues at Baden-Baden as European renewals take shape – Spenner

Reinsurers arrived in Baden-Baden buoyed by strong financial results and minimal catastrophe losses in Europe, but increasingly aware that momentum is shifting towards their cedants.

This was the message from Dirk Spenner (pictured), chief executive of Gallagher Re International, who said the market remains profitable after robust 2024 and 2025 underwriting years, creating an “attractive environment” for capital and competition.

Profitability, coupled with continued high retentions and reduced volatility for reinsurers, has resulted in “an oversupply of capacity in most fields of reinsurance,” the reinsurance broking CEO said.

At this year’s annual Baden-Baden meeting of reinsurers, brokers and buyers, that has translated into signs of softening on negotiating certain European placements.

“Monte Carlo is about concept and risk appetite,” Spenner said. “Baden-Baden is where reality begins to take shape. We would expect some placements to have an element of softening attached to them.”

European cedants are seeking a recalibration of risk-sharing following several years of reinsurer-friendly pricing and tightened coverage, he emphasised.

“Clients feel that the balance has tilted too much towards reinsurers. Now there is an element of rebalancing requested, mostly on coverage and on price,” Spenner said.

However, he warned this does not signal a return to pre-2023 behaviour: discipline remains, but it will be applied selectively.

“You can soften some areas and stay firm on others,” he said. “It is about finding sustainable solutions rather than forcing positions.”

One clear trend is the return and reshaping of frequency loss protections. After being withdrawn in 2023, aggregate covers are back in demand and being structured more sustainably.

“Frequency protection is a core instrument. Clients want it and reinsurers recognise they need to offer solutions, not just say no,” said Spenner.

Capacity is most abundant for mid- to high-level property catastrophe layers with limited geographical spread, as well as European casualty programmes without US exposure, he revealed.

Baden-Baden has also cemented its focus on continental Europe, with North American catastrophe losses – headlined by January’s California wildfires or recent storm losses in Jamaica – not weighing on negotiations for Continental buyers.

“European losses matter far more to European clients than global ones,” Spenner underlined.

Looking ahead to 1 January, he stressed he expects competition, innovation and differentiation to define outcomes.

“This is an exciting environment, one in which reinsurers can prove their value as partners,” he said.

“There will be winners and losers, and most companies can decide they want to be a winner,” he added.