Report Cites Reinsurance Buyers' Market at Midyear Renewals

Reinsurance buyers enjoyed a buyers' market at midyear renewals, marked by double-digit price reductions and improved terms for most placements, according to a new report from Aon.

Global reinsurance demand increased more than 10 percent at midyear, Aon said in its midyear report, Reinsurance Market Dynamics.

The increased demand was driven by expanded product offerings from reinsurers and an increased desire among the top US programs to purchase coverage, Aon said. Elsewhere, demand was largely stable as most insurers looked to maintain net retentions.

According to Aon's report, overall reinsurance capacity was plentiful at midyear renewals and was more than adequate to meet additional US demand.

The Aon report noted that global reinsurer capital rose by $5 billion to a new high of $790 billion as of March 31, largely due to continued growth in third-party capital. Meanwhile, reinsurers' appetites continued to increase and broaden, with Florida exposures experiencing one of the most positive renewals in a decade, the report said.

Aon added that insurers in Latin America and Australia/New Zealand also benefited from fewer constraints and ample reinsurance capacity at midyear renewals.

"Midyear renewals also saw a further shift towards more customized and creative reinsurance solutions," the Aon report said. "Investments in data quality, analytics, and artificial intelligence are unlocking capacity and helping to drive improved terms and conditions. Meanwhile, reinsurers were more open to flexible structures and expanded products, including aggregate covers and products offering earnings protection."

Reinsurers' underwriting results remain strong, Aon said, with reinsurers reporting an average return on equity of 14.1 percent during the first quarter, well above the average cost of equity.

"Absent extreme loss events in the remainder of the year, we expect reinsurers to show greater flexibility around structures, coverage, and retentions going into 2027, which will allow the market to enhance its relevance in what is still a challenging risk environment," the Aon report said.