Facultative reinsurance is evolving from a transactional tool to a strategic resource for achieving objectives, filling treaty gaps, and managing risk in a volatile market, according to WTW's latest report.
Almost 86 per cent of respondents in the report agreed or strongly agreed that facultative reinsurance is central to their strategies for managing risk, capacity, capital, and appetite, suggesting cedents view it as an important enabler of success.
Meanwhile, 68 per cent of insurers plan to increase their use of facultative reinsurance in the next two years, but supply constraints remain a critical challenge.
Over half of respondents cited limited capacity as a barrier, raising concerns about the ability and willingness of reinsurance markets to meet rising demand.
The report is based on a survey of more than 300 senior decision-makers from leading P&C insurers from Europe, North America, Asia Pacific and Latin America.
Specialised risks like cyber, environmental liability, and professional indemnity are driving demand for facultative reinsurance, with cyber both a top opportunity and a major concern.
North American insurers are expanding lines and exploring new products in sectors like cyber and energy, leveraging facultative reinsurance to maintain competitiveness and financial stability.
Similar trends are emerging worldwide, with Asia Pacific addressing capacity constraints and Europe and Latin America managing regulatory and natural catastrophe pressures.
Garret Gaughan, head of direct and facultative at WTW, comments: “We are seeing facultative reinsurance increasingly used by carriers to enable expansion into new riskier product areas, for example.
“We found a strong correlation between the strategic objectives and greatest opportunities that respondents have identified for the next two years, which is fertile ground for new use cases for facultative reinsurance as a business enabler.”
