April 1 renewals are now in place – but as we wait for official reports to emerge, in their buildup, global insurance brokerage Aon highlighted the market’s rapidly evolving dynamics.
Post the January 1 reinsurance renewals, which increasingly favored buyers, the broker noted a significant shift in the market, leading to increased availability of property catastrophe reinsurance capacity. This change was attributed to the appealing risk-adjusted returns that characterized the period.
With approximately 60% of Asia’s treaty business set for renewal on April 1, the date also bears global importance, marking the renewal of some of the world’s most substantial catastrophe programs, notably in Japan, and significant business portfolios in South Korea, China, and India.
The renewals in Japan were expected to continue the positive trajectory observed in the United States during the January 1 renewals, featuring stable to slightly decreased pricing. The markets in South Korea, China, and India were anticipated to witness enhanced competition for catastrophe business, albeit to varying extents.
Although property catastrophe reinsurance pricing generally remained steady, specific Asia-Pacific markets and product lines faced challenges, encountering stricter terms and conditions. These included property per-risk reinsurance, industrial fire accounts, regions recently affected by natural catastrophes, and US exposed casualty treaties.
Facultative reinsurance, a risk transfer solution not widely utilized across Asia-Pacific, was identified as a significant area for growth opportunities, with reinsurers showing a heightened interest in facultative business during the April renewals. Aon also noted the entrance of new market players, including managing general agents.
Significantly, April 1 was described as a pivotal renewal period for India’s market, presenting fresh prospects for reinsurers amid predictions of India becoming the fastest-growing insurance sector among G20 nations over the next five years.
Aon noted that global reinsurance capital nearly reached its 2021 peak levels at $670 billion, buoyed by strong reinsurer performance and a resurgence in asset values in 2023. The insurance-linked securities (ILS) market experienced a historic phase, with Aon Securities reporting a record high of $108 billion in ILS capital by the end of 2023, marking a 7% increase from the previous year.
Despite global natural catastrophe insured losses totaling $118 billion in 2023, the reinsurance sector achieved strong results, driven by heightened reinsurance pricing and increased cedent retentions.
Preliminary assessments suggest global reinsurers reported an average combined ratio of around 90% and an average return on equity of approximately 18%, among the sector’s most favorable outcomes.
George Attard, CEO of Asia-Pacific for Aon’s Reinsurance Solutions, shared insights into the April 1 renewals, describing them as predictable and generally favorable for 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,” he said. “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.”
Aon’s analysis also indicates that US mid-year renewals are initiating discussions earlier, with reinsurers prepared to provide quotes and secure capacity. The firm projects up to $7 billion in additional demand from US insurers for property catastrophe limits at the mid-year renewals, driven by inflation adjustments and evolving risk perspectives, alongside a revitalized Florida market.
Aon’s monitoring of 51 Florida-focused personal lines property insurers noted positive underwriting income for the first time in four years, marking an improvement of nearly $900 million in new underwriting margin for 2023.
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