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Models Are Shaping Structure (More Than Price) as Capital Moves Up the Catastrophe Stack
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Models still matter, but not for price. In a capital-rich market, catastrophe models are shaping coverage structure rather than constraining pricing.
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Higher attachments have shifted loss sharing. Structural changes since 2023 have reduced reinsurers’ modeled share of catastrophe losses despite elevated insured losses.
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Secondary perils now drive volatility. Wildfire and severe convective storms dominate modeled outcomes below attachment points, increasing cedent earnings volatility.
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Capital markets are validating models. Strong cat bond and sidecar performance has reinforced confidence in modeled diversification assumptions.
Catastrophe models remained central to market decision-making across the traditional January 1 reinsurance renewals, but in a materially different way than during the hard-market years of 2023 and 2024.
Rather than serving as a constraint on price, modeled risk is increasingly shaping catastrophe program structures, trigger design, and loss thresholds, reflecting a market reality in which abundant capital has reduced pricing pressure.
All three major renewal reports released in recent weeks converge on the same conclusion: models still matter, but they are no longer driving scarcity.
Higher attachments reshape modeled loss sharing
The core change across the market is structural rather than analytical, shaped by a broad consensus that the catastrophe reinsurance cycle has turned.
