Monte Carlo reflections: from capital formation to capital deployment

In the absence of significant losses, this year’s discussions at the Rendez-Vous in Monte Carlo largely centred on how reinsurers and cedants are managing reinsurance programme structures in the face of softening prices. Heading into the 1/1 renewals, the market’s mood could perhaps best be summed up as one of selective discipline.

Estimates of the amount of capital available to the reinsurance industry vary, but US$700 to US$800bn is the range most commonly cited. This is more capital than the sector has ever had available – and yet the question is whether that capital is being deployed where it is needed most.

In APAC, significant underpenetration across many markets means the region still offers many attractive opportunities. For large numbers of global insurers, APAC is also seen as a valuable diversification play.

The consequence of this is that the discussions reinsurers are having with Asian clients are markedly different from those in the more developed markets of Europe and the US.

“While global discussions were often centred on pricing adequacy, capital deployment and the direction of rates, many Asian conversations were more focused on how reinsurance can support business expansion, product innovation and the closing of protection gaps,” Peak Re told (Re)in Asia as the event drew to a close.

“Another difference is the diversity of Asia itself. Mature markets are paying closer attention to pricing, terms and portfolio optimisation, while high-growth markets are more focused on access to capacity, risk expertise and expanding insurance penetration.”

This means the opportunity is significant, although clients’ precise needs can differ meaningfully by market and line of business.

“Some cedants [in APAC] are undoubtedly benefiting from lower reinsurance costs and stronger terms, but many are also using the opportunity to revisit their risk transfer strategies.”

Roshan Perera

Head of APAC, Gallagher Re

Roshan Perera, Head of APAC for Gallagher Re, describes insurers’ approach to an improved reinsurance environment as “balanced”.

“Some cedants [in APAC] are undoubtedly benefiting from lower reinsurance costs and stronger terms, but many are also using the opportunity to revisit their risk transfer strategies, whether through broader protections, lower retentions, or support for growth into new products and markets,” says Perera. APAC’s significant protection gap presents a particular opportunity for reinsurers looking at the region.

However, despite abundant capital helping to make existing protection cheaper, it is still far from certain how this capacity can be translated into new and more accessible forms of protection.

New opportunities

Many of those attending Monte Carlo argue that now is the time to develop products that address risks that have historically been difficult, expensive or poorly served by traditional insurance.

“These are good market conditions for buyers and sellers to come together and put supplemental products in place,” Jenn Paretchan, Marsh Re’s Global Head of Distribution and Market Relations, said at a press conference ahead of the event.

Nowhere is this discussion more relevant than in Asia Pacific, where the protection gap remains significant despite ample reinsurance capacity. Abundant capital is helping to make existing protection cheaper, but it is still far from certain how this capacity can be translated into new and more accessible forms of protection.

“These are good market conditions for buyers and sellers to come together and put supplemental products in place.”

Jenn Paretchan

Global Head of Distribution and Market Relations, Marsh Re

Despite the launch of new insurance products in recent years, Asia’s protection gap has largely remained unchanged. Peak Re says this is a function of GDP growth, as exposures have risen faster than premiums have kept pace, particularly in coastal regions exposed to natural catastrophes.

“This is both an opportunity for us as an industry and a risk, as we must not underestimate the scale and concentration of these exposures,” says Peak Re.

Mukul Kishore, Head of P&C Reinsurance for APAC at SCOR, says there are a lot of things in APAC’s favour: economic dynamism, increasing insurance penetration, infrastructure investment, and growing awareness of the need for risk protection among both businesses and consumers.

“Demand is growing for a broader range of reinsurance solutions, including specialty lines, casualty, cyber, agriculture, health, and climate-related protection,” says Kishore. “There is also increasing demand for capital solutions, analytical capabilities, and risk expertise, creating opportunities for reinsurers to move beyond pure capacity provision and become long-term strategic partners to clients.”

Abundant reinsurance capacity creates an opportunity to address protection gaps by supporting risks and segments that have historically been underserved.

“The region is highly diverse, with differing economic drivers, insurance penetration levels, and catastrophe exposures across markets. As reinsurers look to build more balanced portfolios globally, we expect APAC to remain an important source of diversification and long-term growth opportunity,” says Perera.

“There is also increasing demand for capital solutions, analytical capabilities, and risk expertise, creating opportunities for reinsurers to move beyond pure capacity provision and become long-term strategic partners to clients.”

Mukul Kishore

Head of P&C Reinsurance for APAC, SCOR

Selective appetite

Despite such opportunities, reinsurers remain highly selective about where they deploy their balance sheets, particularly when risks are difficult to model, aggregate or price with confidence.

“Reinsurers are being more selective about where they put capital, favouring business that still generates a decent risk-adjusted return,” says Perera. “Many are also using retrocession to keep some of that capital free, so it isn’t tied up when a better opportunity comes along and can be redeployed once the market turns.”

According to Peak Re, reinsurers “remain determined to protect their balance sheet against frequency losses”, which is why there has so far not been a return to the structures last seen in 2022 and 2023.

Pressure for effective capital deployment is mounting. Andy Souter, Head of Asia Pacific for Howden Re, says that discussions the broker has been having with clients have largely centred on finding new growth opportunities and diversification, both geographically and across lines of business.

However, he adds that in APAC there “has been less evidence of clients using surplus budget to fill gaps in their reinsurance than is typical elsewhere in other markets, where excess capacity is used more to clients’ advantage to secure additional reinsurance coverage, often with a more private panel of reinsurers.”

Global softening has continued throughout 2025 and 2026, with risk-adjusted property-catastrophe rates down 14.7% at the start of the year, according to data provided by Howden Re. This was the largest reduction since 2014. Many other lines have also softened, although generally with less pronounced rate reductions than property-catastrophe.

“There has been less evidence of clients using surplus budget to fill gaps in their reinsurance than is typical elsewhere in other markets.”

Andy Souter

Head of Asia Pacific, Howden Re

Areas of interest

Selective deployment has the potential to work in APAC’s favour, as reinsurers seek fresh opportunities that align with their disciplined approach to risk. Data centres may be one such area.

At a press conference, Urs Baertschi, Swiss Re’s CEO of P&C Reinsurance, described surging investment in data centres as an “ecosystem of lines of business”, bringing together construction and property, workers compensation, marine and power generation.

“This is what makes the sector so exciting, and we’re obviously very well positioned because we’re in all of these classes, where we take a leading role,” says Baertschi.

He added that the opportunity is worth US$91 billion, underpinned by US$6.6 trillion of investment by 2030. The industry’s existing pool of capital would be important in supporting these risks as they emerge.

“This is what makes the [data centre] sector so exciting, and we’re obviously very well positioned because we’re in all of these classes, where we take a leading role.”

Urs Baertschi

CEO of P&C Reinsurance, Swiss Re

Data centres are especially relevant to APAC, where the region is in the midst of a rapid digital infrastructure build-out. According to Aon, APAC accounts for roughly 30% of global data centre capacity and is growing at more than 20% a year.

Parametric solutions are seen as another fast-growing area that can help narrow APAC’s protection gap in areas such as weather events and earthquakes, though, according to Souter, uptake remains low due to “basis risk and gaps in trust and education around the data”.

Howden Re has just launched a new International Alternative Solutions practice with dedicated parametric capabilities. Souter says that this will help the broker identify new parametric opportunities for its clients.

“Asia continues to see continued growth while US and European markets soften, positioning the region uniquely for conversations about capturing new premium through educating insurance buyers on the potential cost of their cyber risk.”

Jonathan Choi

Director of Insurance Risk Consulting, CyberCube

And then there are the opportunities in cyber.

“Asia continues to see continued growth while US and European markets soften, positioning the region uniquely for conversations about capturing new premium through educating insurance buyers on the potential cost of their cyber risk,” says Jonathan Choi, director of Insurance Risk Consulting at CyberCube.

The right approach

Much of this depends, however, on how reinsurers choose to tackle these emerging opportunities.

“The question is not just whether the region is attractive but how reinsurers raise their value proposition to create opportunities to work with the cedents,” says Souter.

This is going to be an important dynamic going forward, with exposures to the region remaining significantly underweight vis-à-vis global portfolios.

“With dynamic, high-tech economics across the region, APAC represents one of the fast-growing areas for emerging tech and associated emerging risks,” says Souter. “This creates further opportunities for reinsurers to grow, as well as build an understanding of leading technologies and how to structure, price emerging exposures appropriately.”

The single biggest opportunity is for the reinsurance market to demonstrate value, he adds. That goes beyond price and capacity.