Mid-year renewals ‘consolidate’ 1/1 trends – Aon

Mid-year renewals have further consolidated the positive trends at 1/1 and 4/1, setting the stage for a more competitive reinsurance market in 2025, according to reinsurance broker Aon.

Aon launched its Reinsurance Market Dynamics July 2024 report, providing analysis of the market at the June/July 2024 reinsurance renewals, a key annual renewals period, most notably Florida’s property catastrophe market, Latin American business, as well as Australia and New Zealand.

Coming at the start of the Atlantic Hurricane season, and at a critical stage in the reinsurance market cycle, the June-July catastrophe risk focused renewals “are also of global significance”, Aon said.

Overall, insurers achieved positive renewal outcomes at mid-year renewals, with property cat risk-adjusted rate reductions and improvements in terms and/or coverage.

The market emerging from last year’s “global reset” of reinsurance pricing is more dynamic, according to Aon, suggesting the ability to make informed decisions quickly, supported by data and analytics, will be key to navigating the market.

This dynamism is attributed to volatility in secondary peril losses in property, a heightened Atlantic hurricane season forecast, as well as casualty reinsurance concerns, led by social inflation and adverse reserve development.

Mid-year capacity for US cat-exposed business was “more than ample to meet increased demand”, with upwards of $10bn of additional catastrophe limit purchased by US insurers, according to Aon.

Renewals on June 1 and July 1 “continued to build on positive momentum” of the January 1 and April 1 renewals, with increased appetite from traditional reinsurance and insurance linked securities (ILS) markets.

This resulted in “downwards pressure on pricing”, Aon said, for both US nationals and Florida specialist insurers – the latter experiencing rate reductions for the first time in three years.

Meanwhile, renewals in Latin America and the Caribbean were also “broadly positive” for insurers, with “ample capacity to meet demand”, according to Aon, and “risk-adjusted flat, to single-digit rate increases”.

Across the globe, insurers in Australia and New Zealand also experienced stable market conditions, Aon said, with about 80% of their property cat reinsurance business renewed at mid-year.

Total reinsurance capital reached a new record of $695bn by the end of the first quarter of 2024, increasing from $670bn at year-end 2023, Aon said.

Capital increases were driven by retained earnings, recovering asset values and new inflows to the catastrophe bond market.

Aon Securities estimated overall ILS capital increased to an all-time high of $110bn through the second quarter, increasing from $108bn at year-end 2023, with a record $46bn of cat bond limit on-risk.

For the first time, more than $8bn of catastrophe bonds were issued in a single quarter, Aon remarked.

Reinsurers are generating “robust returns by historical standards”, the report concluded, with annualised returns on equity averaging around 20% in the first quarter of the year.

“We are pleased to see the ongoing stability of the reinsurance market, which now presents profitable growth opportunities for both insurers and reinsurers,” said Steve Hofmann, co-president of US reinsurance solutions at Aon.

“Over the past 18 months, we have advocated for this balance on behalf of our clients by introducing additional risk transfer capacity, and launching new technologies to enhance risk assessment and management,” Hofmann said.

Kevin Traetow, co-president of US reinsurance solutions at Aon, added: “Indeed, the ability to make quicker, data-driven decisions provides our clients with the clarity and confidence needed to navigate the market effectively.”