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Digital EditionSpecialty Insurance Markets Show Mixed Signals as Abundant Capacity Drives Competition
Abundant reinsurance capacity is creating a buyer’s market across most specialty insurance lines, with construction treaty capacity reaching its highest level in five years while marine and cargo segments see double-digit rate reductions, according to Guy Carpenter’s Global Specialties 2025 Market Update.
The influx of capital across specialty markets is fundamentally altering the competitive landscape. Construction and engineering sectors are experiencing particularly robust growth, with direct market probable maximum loss capacity increasing to an estimated $3.4 billion this year from $3.1 billion. The sector benefits from what the report calls “a strong pipeline of project opportunities scheduled over the next 2 years.”
Similar capacity expansions are evident in the war, terrorism and political violence market, where new entrants and incumbent insurer expansion have created what the report characterizes as “an abundance of capacity.” This oversupply dynamic extends to marine and energy lines, where the report notes “a broad oversupply of capacity across most marine and energy classes” at current pricing levels.
The cyber market presents a notable countertrend. While experiencing healthy growth in both supply and demand, insurers are retaining more risk internally, Guy Carpenter said. Approximately 40% of premium is now being ceded to reinsurers, down from about 50% in 2022, signaling growing confidence among primary carriers in their ability to manage cyber exposures, the report noted.
Geopolitical Tensions and Loss Activity Create Pockets of Uncertainty
Despite overall market softening, several factors are creating volatility in specific sectors, according to Guy Carpenter.
Aviation insurance faces particular pressure following what the report describes as “a series of high-profile airline loss events in the first half of the year and ever-increasing attritional losses,” reversing the downward pricing trend that had prevailed since the COVID-19 pandemic.
Geopolitical risks are increasingly influencing underwriting decisions, particularly in marine lines. The report highlights “heightened geopolitical tensions in regions including the Red Sea, the Strait of Hormuz, and the Persian Gulf between Iran and Qatar,” which are intensifying focus on war-risk exposures.
These concerns extend beyond marine, with the credit, bond and political risk sector navigating what the report characterizes as “ongoing geopolitical instability and economic uncertainty” that has persisted for the past five to six years.
Legal uncertainties add another layer of complexity. A UK High Court ruling in June provided some clarity on Russian airplane leasing losses related to the Ukraine conflict, though the report notes that “discussions with reinsurers will continue for some time” as insurers study the verdict’s implications for loss occurrence wordings.
Strategic Positioning for 2026 Renewals
The divergent market conditions across specialty lines are prompting insurers to reconsider their reinsurance strategies ahead of January 2026 renewals. The report indicates that retentions “are likely to come under some pressure at January 1, 2026, along with price and coverage” as reinsurance buyers seek to capitalize on favorable market conditions where they exist.
Reinsurance buyers are increasingly exploring composite structures rather than purchasing reinsurance for individual lines, Guy Carpenter said. The report notes clients “are more likely to combine lines of business at a level to get economies of scale and put more of their specialty business into a composite.”
“Looking ahead, we predict a likely increase in demand for capacity with a softening reinsurance and retro market,” said James Boyce CEO of Global Specialties for Guy Carpenter. “Reinsurers are expected to recalibrate to adapt to the changing risk landscape and market conditions, balancing discipline with pragmatism. There is a sustained appetite for growth, and we anticipate those reinsurers who are willing to offer flexibility, product differentiation and innovation are most likely to prevail,” he said.
View the full report here. &
