Guy Carpenter’s Randy Fuller says closing the aggregate XoL coverage gap can strengthen reinsurer-cedant relationships
The recent hard market cycle reshaped the catastrophe reinsurance landscape in fundamental ways.
In an abundance of caution, many reinsurers withdrew support for lower-attaching reinsurance programs and coverage for “secondary” perils. This change in appetite significantly affected the availability of aggregate excess-of-loss (XoL) protection, with market capacity declining by more than 80% over the past five years. What remains is a critical coverage gap for protection against high-frequency catastrophe loss years. Aggregate XoL has become one of the most significantly underserved components of today’s reinsurance marketplace.
For reinsurers, filling this gap is a challenge that also represents a tremendous opportunity. As we transition to more stable market conditions, prior lessons learned will result in more effective and sustainable solutions for solving frequency-driven volatility.
The need for frequency protection is as pressing as ever, and new perspectives on risk can underpin solutions. Improved understanding of actual event frequency in recent years – and the drivers of loss such as changes in weather patterns, population growth and inflation – provide a stronger foundation for evaluating frequency exposure.
Catastrophe reinsurance programs themselves have been recalibrated, with attachments shifting materially higher, generally attaching at no less than a 1-in-10-year return period. This shift in risk appetite, with cedants’ occurrence retentions increasing by 50% to 100%, will also translate to frequency protection covers, resulting in products that align both cedants’ risk transfer goals and reinsurers’ desired risk profile.
Importantly, the rationale for supporting aggregate XoL extends beyond filling a market void. For reinsurers, underwriting frequency protection provides portfolio diversification benefits, complementing peak peril occurrence-driven exposures. It also strengthens relationships with cedants. As competition intensifies on traditional occurrence catastrophe programs, reinsurers that demonstrate flexibility and commitment to solving cedants’ volatility challenges will find their partnerships becoming more durable and valuable.
The early signs of returning appetite are already visible. In the first half of 2025, we saw a notable increase in quoting activity for coverages with frequency protection features. Significant new capacity was deployed into large global and US national aggregate programs.
While these developments are encouraging, the market opportunity extends well beyond the largest buyers. Regional and niche carriers are also seeking solutions that address the unpredictability of frequency-driven losses, and aggregate XoL remains the most natural fit.
Additionally, recent innovation in parametric solutions and catastrophe modeling has enabled new ways of defining triggers and delivering efficient capacity.
For cedants, this protection is vital. It reduces volatility in earnings, supports more stable capital planning and provides a safety net during years of multiple moderate events. For reinsurers, the structure offers a way to put capital to work in a disciplined manner, tapping into demand that is both substantial and persistent.
How Guy Carpenter Can Help
Guy Carpenter helps companies evaluate catastrophe exposure and design programs that balance risk transfer efficiency with reinsurer risk appetite. By leveraging new risk perspectives and market innovation, we develop structures that work for both sides of the equation. Aggregate XoL is not a new concept, but in today’s marketplace, it has never been more relevant. The opportunity lies in approaching it with the sophistication and balance that modern risk management demands.