Reinsurance renewal pressures to persist for APAC buyers: Aon’s Attard

The same reinsurance renewal pressures experienced at the January renewals this year are anticipated to persist for the April and July 1st renewal seasons for buyers in Asia Pacific, according to Aon Reinsurance Solutions APAC CEO George Attard.

However, Attard notes that the placement process should be “significantly more orderly” with lessons learned and established risk appetite from reinsurance carriers.

“The January renewals have shown that clear messaging and client differentiation resulted in favorable outcomes and that having a partner with strong market relationships and global access to all types of capacity was key to success,” Attard explained.

Capacity is on the rise for Asia Pacific risks, Attard believes and this means the renewal could be less pressured at April 1st and July 1st, despite the same challenges brought by the imbalance in property catastrophe demand-supply, changes in retrocession covers and elevated loss activity existing.

“We continue to build capacity in APAC by attracting new capital to the market and expanding innovative risk transfer vehicles, as well as creating global capacity via access to Asian domiciled reinsurers. APAC offers reinsurers diversified growth opportunities in expanding markets of size and scale, while ongoing advances in catastrophe modelling, including the development of new earthquake models for low and challenging seismic settings such as Singapore and Korea, help to support the allocation of reinsurance capacity to the region,” Attard said.

Stable demand is anticipated in the main, following on from what was seen for Asian renewals at January 1st.

At the January renewals, Attard explained that, “While capacity came under pressure at the January renewal, particularly in China, South Korea and Indonesia, it was available at a price.

“Rates in APAC varied by market as reinsurers pushed for significant increases in response to risk and catastrophe loss activity across the region, as well as global constraints on property catastrophe capacity.

“In addition to rate, retention levels came under pressure on larger programs as reinsurers sought to move away from frequency losses, and as some buyers looked to mitigate price increases. Reinsurers also pushed structural changes to proportional reinsurance contracts, including event limits and expanded loss participation clauses, as well as reduced ceding commissions. With respect to coverage, sanctioned territories and cyber exclusions were reinforced.”

All these trends are expected to persist through April next and onto July, as other parts of Asia Pacific renew their covers, including Japan, Australia and New Zealand.

A more orderly market is to be expected, with a little more capacity flowing into reinsurance, including from insurance-linked securities (ILS) sources.

In addition, Attard said that protection buyers can have some levers of their own, to make their reinsurance renewals a little easier, “For insurers, capital and reinsurance optimisation is more important than ever.

“However, clients have a number of levers at their disposal, including integrated placements across property and casualty, legacy and structured reinsurance solutions, strategic consulting and data analytics.”