Reinsurers reducted rates for property catastrophe risk and better coverage

AON has launched of its Reinsurance Market Dynamics report, which provide analysis of the marketplace at the June/July 2024 reinsurance renewals – a key annual renewals period, most notably in the Americas, Australia and New Zealand.

Insurers achieved positive mid-year renewal results. These included global reinsurance rate reductions for property catastrophe risk and better terms and coverage.

Despite a more competitive reinsurance market, the environment remains dynamic due to secondary peril losses in property, a heightened Atlantic hurricane season forecast, social inflation, and adverse reserve development in casualty.

Reinsurers reducted rates for property catastrophe risk and better coverage

In contrast to 2023, mid-year capacity for U.S. catastrophe-exposed insurance business was more than ample to meet increased demand, with upwards of $10 bn of additional catastrophe limit purchased by U.S. insurers.

Renewals in Latin America and the Caribbean also yielded positive outcomes for insurers. There was ample capacity to meet demand, with risk-adjusted flat to single-digit rate increases.

In Australia and New Zealand, insurers experienced stable market conditions, with around 80% of property catastrophe reinsurance business renewing at mid-year.

The report, designed to guide better business decisions, will show total reinsurance capital reached a record $695 bn by the end of Q1 2024, up from $670 bn at the end of 2023.

Property Catastrophe Bonds Issued and Outstanding

Property Catastrophe Bonds Issued and Outstanding By Quarter
Source: Aon Securities, LLC

Reinsurance renewals on June 1 and July 1 continued to build on the positive momentum of the January 1 and April 1 renewals, with increased appetite from traditional reinsurance and ILS markets resulting in downwards pressure on pricing for both U.S. nationals and Florida specialist insurers – the latter experiencing rate reductions for the first time in three years.

Reinsurers’ capital increases were driven by retained earnings, recovering asset values and new inflows to the catastrophe bond market.

Aon Securities estimates that overall ILS capital increased to an all-time high of $110 billion through the second quarter, increasing from $108 billion at year-end 2023, with a record $46 billion of catastrophe bond limit on-risk. For the first time, more than $8 billion of catastrophe bonds were issued in a single quarter.

The report show that reinsurers are generating robust returns by historical standards, with annualized ROE averaging around 20 percent in the first quarter of the year.

Steve Hofmann, co-president of U.S. Reinsurance Solutions at Aon

We are pleased to see the ongoing stability of the reinsurance market, which now presents profitable growth opportunities for both insurers and reinsurers

Steve Hofmann, co-president of U.S. Reinsurance Solutions at Aon

“Over the past 18 months, we have advocated for this balance on behalf of our clients by introducing additional risk transfer capacity, and launching new technologies to enhance risk assessment and management”, Steve Hofmann said.

Kevin Traetow, co-president of U.S. Reinsurance Solutions at Aon continued: “Indeed, the ability to make quicker, data-driven decisions provides our clients with the clarity and confidence needed to navigate the market effectively.”

Yana Keller  by Yana Keller