Easing of retro market conditions bolstered 1/1 reinsurance renewal capacity: Aon

An easing of conditions in the retrocession market has helped to bolster capacity in advance of the January 1st 2025 reinsurance renewals, resulting in a situation where capital was more than adequate to meet growing client demand, broker Aon has said today.

Overall, reinsurance capital providers showed greater flexibility to buyers after a second year in a row of strong results, Aon explained.

The expansion of available capacity was more than sufficient to complete the January 2025 reinsurance renewals even as global demand for protection continued to rise through 2024.

Aon provided its latest estimate for global reinsurer capital today as well, which it says rose to a new high of $715 billion at September 30th 2024.

That represented an increase of $45 billion compared to the end of 2023, the reinsurance broker said.

Helping to smooth the renewals further was an easing of conditions in the retrocession market, Aon further explained, adding that this helped to bolster capacity in time for the 1/1 2025 renewal season.

Retrocession market conditions appear to have been much more favourable, which has been noted in the catastrophe bond market in recent weeks where buyers have been able to secure capacity from the capital market at favourable pricing.

With retrocession pricing and terms more favourable, it has allowed reinsurers to engage in the 2025 renewals on the front-foot, delivering more competitively rated capacity for buyers, while securing adequate protection for their own portfolios.

Property reinsurance buyers experienced these eased market conditions, with Aon saying that “cedants with loss-free programs were able to secure catastrophe coverage on incrementally improved terms.”

“Reinsurers’ desire to grow created opportunities for buyers to align coverage and purchase additional protection,” the broker continued to explain.

While 2024 saw another year of significant global insured catastrophe losses, which Aon estimates will reach above $140 billion for the full-year, the broker noted that renewal impacts due to loss activity were largely confined to the most affected local markets, on which it highlights Canada, Central and Eastern Europe and the United Arab Emirates as feeling the loss effects.

Aon also commented on casualty reinsurance renewals, saying these “were broadly stable overall, even in the U.S., where robust underlying insurance pricing helped to offset reinsurer concerns around adverse claims and litigation trends.”

Although there was still clear cedant differentiation by reinsurers, where loss experience, business mix and data quality were all factors that drove the renewal outcome for Aon clients.

Specialty reinsurance renewals continue to be seen as a source of growth, Aon explained, but January renewal outcomes varied, but “pricing was generally stable to slightly lower, with a modest easing of other terms and conditions in some areas.”

Alfonso Valera, co-CEO EMEA at Aon’s Reinsurance Solutions, commented, “We observed an increased level of appetite in high margin lines of business and regions at the January 1 renewals, driven by reinsurers that desired improved signings across a broad swath of insurer clients.

“Many reinsurers need to revisit how they articulate and deliver value to clients in a sustainable, profitable manner, as now is the time to unleash financial and intellectual capital to help insurers grow profitably and expand their offerings to sustain a healthy market.”

Tomas Novotny, co-CEO EMEA at Aon’s Reinsurance Solutions, added, “During the January renewal season, reinsurers demonstrated strong appetite for writing business in this current hard market, and most renewals resulted in meaningful over-subscriptions. Reinsurers are clearly trying to maximize the scale of the business written with great return-on-equity potential, and the most successful are those that are able to meet clients’ needs holistically, across their portfolios and across the board on their catastrophe programs.

“The market’s willingness to deploy its capacity in support of currently unmet need will define the sector’s long-term relevance, and we should all remember that reinsurance is not just a transaction; it’s about partnering with insurers and helping them grow, with Aon here to drive that process and shape better business decisions for all parties.”

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