secondary perils

As the reinsurance sidecar market keeps growing, GC Securities is placing significant emphasis on this sector as a major focus for 2026, while the firm also sees a need for greater attention on helping clients secure aggregate capacity for secondary perils, executives from the firm told Artemis in a recent interview.

Having purchased aggregate retrocessional reinsurance and secondary peril protection earlier this year after the California wildfires, reinsurer Conduit Re intends to continue evolving its retrocession strategy in 2026, to better protect against these types of events, its CEO Neil Eckert explained this week.

Underscoring the potential impacts of climate change across the insurance-linked securities (ILS) market, ILS specialists at global asset management group Schroders have suggested that ILS managers should recalibrate risk assessments to reflect the climate change that has already occurred, and not just long-term projections.

Conduit Re’s retrocession strategy has evolved to complement its peak peril protections, CEO Neil Eckert explained during the company’s Q1 2025 analyst call today, highlighting recent purchases of catastrophe hedging for US and global secondary perils, as well as increased aggregate cover.

Faced with the possibility of “peak year” insured losses exceeding $300 billion, the Swiss Re Institute has suggested that the well-capitalised reinsurance sector, backed by $500 billion in capital, is pivotal to absorb large shocks.

In light of the recent Los Angeles wildfires, catastrophe bond fund manager Icosa Investments has called for the re/insurance industry to move beyond the categories of “peak” and “secondary” perils, warning of implications for cat bonds and investors amid rising losses from these types of events.

Climate change is seen as a driver of higher frequency of damaging hail storm events according to specialty re/insurer Chaucer, who highlights a 267% increase in European hail storms in the past five years.

With attachment points still higher across the global reinsurance and retrocession markets, the effect of retaining more risk on balance-sheet is anticipated to drive an upwelling of demand for lower-layer catastrophe covers, according to analysts at Goldman Sachs.

The catastrophe bond market needs to price appropriately for so-called secondary perils and stop giving them a “free-ride”, as there is a need to continue offering this type of typically frequency or aggregate style reinsurance protection, but investors must be adequately compensated for it, Tenax Capital has said.

Recent results from major Italian primary insurance companies have clearly evidenced that reinsurance terms, conditions and higher attachments are driving higher retention of catastrophe losses, eroding insurer performance, Fitch Ratings has highlighted.