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Positive trend of Jan & April reinsurance renewals to continue at mid-year -- Aon

Reinsurance market conditions since the 1 January renewals have continued to favour reinsurance buyers, with a 'dramatic shift' towards 'ample' property catastrophe reinsurance capacity, driven by attractive levels of risk-adjusted returns, having been experienced over the past 12 months, says Aon, a leading global professional services firm.

Aon will provide a comprehensive analysis of the reinsurance marketplace and renewal trends in a report, Reinsurance Market Dynamics April 2024, which will be launched on 2 April.

While around 60% of Asia treaty business renews at 1 April, the period also has global significance, with some of the world’s largest catastrophe programmes renewing in Japan, as well as large portfolios of business renewing in other regions – including South Korea, China and India.

Property catastrophe renewals in Japan reinforced the positive trends seen in the US at the 1 January reinsurance renewals, with pricing flat to slightly reduced, while South Korea, China and India also saw increased competition for catastrophe business, to varying degrees.

While pricing was broadly flat for property catastrophe reinsurance, certain Asia Pacific markets and product lines remained challenged and subject to a tightening in terms and conditions – including property per-risk reinsurance; industrial fire accounts; certain natural catastrophe loss-affected regions; and US exposed casualty treaties.

In terms of growth opportunities, 1 April represents a major renewal date for facultative reinsurance – a risk transfer solution that is not utilised broadly across the Asia Pacific. Reinsurers displayed an increased appetite for facultative business at the April 1st renewal, while new players continue to enter the market such as managing general agents.

1 April is also a key renewal period for the Indian market, with new opportunities for reinsurers given India’s forecast position as the fastest-growing insurance sector of all G20 countries over the next five years.

Reinsurance capital

The report reveals that, at $670bn, total global reinsurance capital is now close to the peak levels recorded in 2021, resulting from strong reinsurer results and a recovery in asset values in 2023, as well as a historic period for the insurance-linked securities (ILS) market. Aon Securities estimates that overall ILS capital increased to $108bn at year-end 2023, which marks a 7% increase on the prior year, and an all-time high.

Despite global natural catastrophe insured losses totalling $118bn in 2023, many reinsurers performed strongly, due to elevated reinsurance pricing and higher cedent retentions. Early analysis suggests that global reinsurers posted an average combined ratio of around 90% and an average return on equity of around 18%, representing one of the sector’s best-ever results.

Mr George Attard, CEO of Asia Pacific for Aon’s Reinsurance Solutions, said, “The 1 April reinsurance renewals were more predictable and generally favourable to reinsurance buyers. As mid-year renewals get underway for the catastrophe-exposed markets of Florida, Australia and New Zealand, reinsurers are indicating a strong appetite for catastrophe risk.

“We would expect the positive trend of the January and April renewals to continue at mid-year renewals, with adequate capacity for property catastrophe risks and enhanced pricing competition. Insurers looking to purchase additional limit will also find adequate capacity to meet their needs.”

Looking ahead

Aon’s analysis shows that earlier renewal discussions are happening on a significant number of US mid-year renewals, with reinsurers ready to provide indications and secure capacity.

Aon forecasts as much as $7bn of additional demand from US insurers for property catastrophe limit at the mid-year renewals, as programmes keep pace with inflation and evolving views of risk, and from a resurgent Florida market.


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