Aon: April 1 Renewals Favor Reinsurance Buyers

In a recent statement, Aon said April 1 reinsurance renewals represent a critical period for the Asia Pacific region. Aon's most recent findings show that following a challenging period for cedents, market conditions since the January 1 reinsurance renewals have continued to favor reinsurance buyers, with a dramatic shift toward ample property catastrophe reinsurance capacity, driven by attractive levels of risk-adjusted returns, having been experienced over the past 12 months.

While approximately 60 percent of Asia treaty business renews on April 1, this period holds global significance, with major catastrophe programs renewing in Japan and significant portfolios in South Korea, China, and India.

Renewals in Japan mirrored the positive trends observed in the United States at the January 1 renewals, with stable to slightly reduced pricing. Increased competition for catastrophe business was witnessed in South Korea, China, and India, albeit to varying extents.

Despite flat pricing in property catastrophe reinsurance, certain Asia Pacific markets and product lines faced challenges and tighter terms and conditions, including property per-risk reinsurance and US exposed casualty treaties.

April 1 also represents a significant renewal date for facultative reinsurance, with reinsurers displaying heightened interest in this risk transfer solution. Moreover, the India market presents new opportunities for reinsurers, given its projected position as the fastest-growing insurance sector among G20 countries over the next 5 years.

The report highlights that total global reinsurance capital has reached $670 billion, nearing peak levels recorded in 2021. Strong reinsurer results, asset value recovery in 2023, and a robust period for the insurance-linked securities (ILS) market contributed to this milestone.

Despite natural catastrophe insured losses totaling $118 billion in 2023, reinsurers performed strongly due to elevated pricing and higher cedent retentions, posting impressive average combined ratios and returns on equity.

Looking ahead, Aon anticipates a continuation of positive trends observed in January and April renewals, with strong appetite for catastrophe risk at midyear renewals and adequate capacity for property catastrophe risks.

The report also anticipates early renewal discussions for a significant number of US midyear renewals, with reinsurers prepared to provide indications and secure capacity. Aon forecasts substantial additional demand from US insurers for property catastrophe limit at midyear renewals, driven by inflation and evolving risk perceptions.

George Attard, CEO of Asia Pacific for Aon's Reinsurance Solutions, said, "The April 1 reinsurance renewals were more predictable and generally favorable to reinsurance buyers. As midyear 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 midyear 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."

For detailed insights into April 1 reinsurance renewal trends, please refer to Aon's Reinsurance Market Dynamics April 2024 report.