(Only advisable for insurers with a highly competent, technically advanced internal reinsurance team)
Many insurance companies have begun evaluating whether they can reduce total reinsurance expenditure by placing treaties directly with reinsurers, bypassing the traditional reliance on reinsurance brokers. Direct placement can indeed produce savings under certain conditions — but only when an insurer possesses the internal expertise, capacity, and regulatory understanding needed to perform the full suite of broker functions to a high standard.
Below is a structured exploration of:
1. How costs may be reduced by going brokerless
2. Why a broker can be an additional burden on cost
3. Which insurers are truly able to forgo brokers
4. What capabilities such insurers must possess
1. How an insurance company can reduce reinsurance cost by going brokerless
1.1 Eliminating brokerage commissions
Brokers typically charge brokerage commissions on proportional treaties and brokerage fees or similar loadings on non-proportional placements. These can range from 1% to 10% depending on the treaty type, structure, and jurisdiction.
If an insurer places directly, this intermediary cost is removed, meaning reinsurers can allocate that proportion of the premium to risk pricing rather than distribution expense. Over multiple treaties, this can directly reduce overall reinsurance spend.
1.2 Direct negotiation of terms with reinsurers
A highly capable in-house reinsurance department can negotiate directly with global reinsurers and may:
• Customise treaty structures more effectively (because internal teams have full context of portfolio strategy and risk appetite),
• Secure better alignment of interests by engaging reinsurers early and transparently,
• Avoid templated solutions that may be offered by some brokers trying to place multiple similar accounts efficiently.
Without brokers, insurers can control the narrative, the data flow, the interpretation of loss histories, and the modelling logic, which may help in negotiating more favourable pricing or terms.
1.3 Reduced frictional loadings
Broker-placement processes sometimes introduce delays, multiple iterations, and additional scrutiny that can increase reinsurers’ perceived expense or uncertainty. By presenting a well-prepared, highly technical submission directly, insurers can:
• reduce reinsurer administration costs,
• reduce perceived model risk,
• shorten negotiation cycles,
• reduce “uncertainty loadings” reinsurers often add when information travels indirectly.
1.4 More efficient data transmission
If the insurer’s reinsurance analytics team is strong, they can present:
• clean, reconciled exposure data,
• well-explained catastrophe modelling outputs,
• transparent actuarial analyses and development patterns.
This clarity can reduce reinsurer pricing margins. In some cases, reinsurers reward direct cedants who present “best-in-market” data packages with preferred terms or reduced technical loadings.
1.5 Direct, long-term strategic partnerships
Direct relationships with reinsurers can yield:
• multi-year agreements,
• preferential reinstatement terms,
• early access to alternative capital solutions,
• reduced volatility in renewal cycles.
Over time, reinsurers often price more competitively for cedants whose governance, transparency, and data quality they understand deeply.
2. How a reinsurance broker can represent an additional burden on cost
Reinsurance brokers provide value — especially for insurers without advanced internal capability — but they unquestionably add cost, both explicit and implicit.
2.1 Brokerage commissions and fees
This is the most visible cost. Brokers are remunerated through:
• commission on proportional treaties,
• fees on excess-of-loss treaties,
• administrative charges, modelling fees, or consultancy-style add-ons.
These can collectively represent a material portion of reinsurance spend.
2.2 Potential for misalignment of incentives
Brokers are intermediaries, not risk bearers. Their incentives may not always perfectly match the insurer’s, for example:
• they may favour placements that are simpler to market,
• they may prioritise reinsurers with whom they have strong commercial relationships,
• they may advocate structures that generate higher commissions.
While professional brokers act ethically, the existence of these incentives creates a subtle cost dynamic for insurers.
2.3 Additional operational layers
Every additional party in the placement chain introduces:
• more communication steps,
• more documentation cycles,
• more opportunities for misinterpretation,
• more administrative workload on reinsurers.
Reinsurers sometimes load for this complexity in their pricing.
2.4 Broker-driven standardisation
Brokers often promote market-standard structures to facilitate efficient placement across multiple clients.
This can be cost-effective, but in some cases insurers end up:
• purchasing more limits than needed,
• accepting less optimised attachment points,
• retaining structures that favour reinsurer appetite rather than cedant optimisation.
These structural inefficiencies add financial cost that is less visible but significant over time.
3. When an insurer should not use a broker
(Only in highly specific, advanced organisational circumstances)
Going brokerless is not a universal recommendation.
It is only appropriate for insurers that meet all of the following conditions:
3.1 A reinsurance team deeply familiar with all the tiny technical and operational details
This includes:
• treaty wording drafting and negotiation,
• slip construction,
• schedule preparation,
• claims cooperation and notification clauses,
• reinstatement clause nuances,
• hours clauses,
• indexation,
• follow-the-fortunes vs follow-the-settlements implications,
• cut-through clauses,
• cash call mechanisms,
• commutation processes.
These are areas where even small errors can lead to catastrophic financial consequences.
Only a highly specialised team can safely manage them without broker oversight.
3.2 Deep knowledge of local and international reinsurance laws
Reinsurance transactions cross legal, regulatory, and tax boundaries. A broker often maintains specialists in:
• cross-border reinsurance taxation,
• regulatory acceptability in each jurisdiction,
• credit risk and security requirements,
• solvency capital treatment,
• sanctions frameworks,
• contract enforceability in different legal systems.
Insurers should avoid brokerless placements unless they have or retain similar expertise in-house.
3.3 Strong internal actuarial, mathematical, and statistical capability
Reinsurers expect sophisticated analysis, including:
• portfolio segmentation and credibility models,
• catastrophe modelling interpretation,
• stochastic simulation of loss distributions,
• technical rate-on-line calculations,
• expected loss cost curves,
• parameter uncertainty analysis.
Only insurance companies with mathematically mature teams can confidently defend their pricing and exposure narrative directly in front of global reinsurers.
3.4 Experienced negotiators who understand market psychology
Reinsurance placement is partly technical but also part relationship-driven.
Insurers must be able to manage:
• market dynamics,
• reinsurer negotiation style,
• capacity strategy,
• lead reinsurer expectations,
• competitive tension creation.
Without brokers, the insurer must orchestrate all of this independently.
3.5 Established relationships with international reinsurers
A brokerless strategy can only succeed if reinsurers:
• recognise the insurer as a credible counterparty,
• trust their data quality,
• believe in their governance,
• are willing to allocate capacity directly.
A small or new insurer without deep market relationships should not attempt direct placement.
4. Risks of going brokerless
Even with a strong team, insurers face several risks when bypassing brokers:
4.1 Market reach limitations
Brokers provide wide access to the global marketplace. Without them, insurers may:
• fail to reach all suitable reinsurers,
• reduce competitive tension,
• end up with narrower or less diversified panels.
4.2 Negotiation power imbalance
Brokers aggregate demand from many cedants, giving them leverage that individual insurers do not possess.
Without brokers, an insurer’s negotiating power may reduce.
4.3 Increased operational burden
Direct placement means the insurer must manage:
• wording negotiation,
• data room construction,
• model validation discussions,
• slip issuance,
• regulatory documentation,
• claims communication channels,
• accounts and settlements.
This requires time, staffing, and internal controls.
4.4 Higher error risk
Brokers often catch errors before reinsurers see them.
Without this filtering layer, mistakes in data, modelling or wording may go unnoticed — potentially becoming financially significant.
5. When going brokerless is most effective
The insurers most likely to succeed without brokers are those that:
• have dedicated reinsurance divisions with seasoned treaty specialists,
• employ actuaries, catastrophe modellers, statisticians, and analysts capable of preparing world-class submissions,
• maintain long-standing relationships with major global reinsurers,
• operate in stable or well-understood markets,
• possess internal legal counsel familiar with cross-border reinsurance law,
• run robust risk-management, exposure-modelling, and governance frameworks,
• have historically clean loss records or well-managed portfolios.
For these insurers, eliminating brokerage may generate significant efficiency and cost advantages.
6. Balanced conclusion
Avoiding brokers can reduce reinsurance cost — but only for insurers who can fully replicate the technical, legal, analytical, and negotiation expertise that brokers traditionally provide.
A well-resourced insurer with:
• deep treaty knowledge,
• international regulatory expertise,
• sophisticated quantitative analysis capabilities, and
• strong reinsurer relationships
may achieve materially lower reinsurance costs by placing directly.
However, for most insurers — particularly smaller companies, newly established markets, or those without advanced actuarial and modelling teams — brokers remain essential. Their expertise, global market access, operational support, and ability to create competitive tension generally justify the brokerage cost.
Going brokerless is therefore not an industry-wide solution; it is a strategic option reserved for insurers with exceptional internal capability.
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