Following a challenging period for cedents, market conditions since the 1st January reinsurance 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 over the past year.

This is amongst the findings of Aon’s Reinsurance Market Dynamics April 2024 report, launched today.

While around 60% of Asia treaty business renews at April 1st, 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 1st January renewals, with pricing flat to slightly reducing, while South Korea, China and India also saw increased competition for cat 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, April 1st represents a major renewal date for facultative reinsurance – a risk transfer solution that is not used broadly across Asia-Pacific. Reinsurers displayed an increased appetite for facultative business at the April 1st renewal, while new players continue to enter the market, including MGAs.

The report reveals that, at US$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 market. Aon Securities estimates that overall ILS capital increased to US$108bn at year-end 2023, a seven per cent increase on the prior year and an all-time high.

Despite global natural catastrophe insured losses totalling US$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%.

George Attard, CEO of Asia-Pacific for Aon’s Reinsurance Solutions, said: “The April 1st reinsurance renewals were more predictable and generally favourable to reinsurance buyers. As mid-year renewals get under way 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.”

---