Guy Carpenter President and CEO Dean Klisura on rising volatility and addressing systemic risks
How is market volatility affecting the reinsurance industry?
The reinsurance sector is facing a series of complex and competing issues. On the one hand, there continues to be abundant capital in the market and reinsurers have achieved strong results. On the other, there is heightened volatility, rates are softening, and reinsurers are being forced to evolve within an expanding universe of risks.
This year – particularly with the Los Angeles wildfires, Cyclone Alfred in Australia and the Myanmar/Thailand earthquake – we have seen the industry absorb the impact of losses as reinsurers have generally maintained their original growth and profit expectations for 2025. The current landscape presents an opportunity for innovation, from embedding reinsurance into capital markets in real time to shrinking the protection gap and strengthening resilience.
The world today is experiencing increased volatility, and insurance company CEOs and their leadership teams are continually assessing how this volatility affects their capital strategies. Guy Carpenter is keenly aware of these challenges – and working hard to help clients stay ahead of them.
With systemic risks increasingly becoming a boardroom conversation, how do you advise leaders on managing those risks?
Our clients, and Guy Carpenter’s leaders, are constantly evaluating the global geopolitical environment, with trade wars affecting supply chains and civil unrest giving rise to global economic shocks.
Climate, an ongoing systemic risk, continues to weigh on economic growth. The UN Office for Disaster Risk Reduction is now estimating global spending on climate damage and disasters to be as high as $2.3 trillion annually. Enhancing risk mitigation is essential for industry leaders to maintain sustainable development and to reduce the impact of these events on individuals, communities, businesses and economies.
The reinsurance sector also has an opportunity to help address the protection gap. Our industry supports governments and businesses to help create public-private partnerships.
Guy Carpenter uses parametric solutions and proprietary modelling tools that provide protection for rural and underserved regions.
Executive teams are concentrating on driving growth in an increasingly volatile geopolitical and economic landscape, while managing expenses and emphasising near-term concerns. Although these conditions can pose difficulties for our clients, they also create opportunities for us to support them.
Guy Carpenter is uniquely positioned to partner with other Marsh McLennan businesses to guide strategies, navigate growth opportunities and strengthen our clients’ resilience.
What should companies be thinking about for next year?
Preparedness on exposures, the potential for inflation, balance sheet resilience and sustainable growth are key areas of focus. But as we look ahead to 2026 renewals, now is the time for insurance companies to optimise their reinsurance structures in terms of expanded coverage, product, peril and earnings protection.
Traditional business models and value chains are under growing threat from artificial intelligence and other technologically enabled disruption. Those traditional models tend to have legacy process inefficiencies and information asymmetry, increasing transaction costs. Nearly all cedants are thinking about ways to find efficiency in their operating models and driving down expense ratios.
Interest rates in many markets are stabilising and coupled with lower costs of capital, could create a positive environment for M&A activity. Guy Carpenter’s knowledge of the market positions us well to advise clients on both M&A and capital-raising strategies.
As history tells us, changing risk landscapes ensure that “business as usual” is not a viable option for success over the longer term. By pushing boundaries and embracing technology, our industry can transcend transactional coverage and continue to be a vital force in stabilising an uncertain world.