April 1 is an important renewal for the Asia Pacific region, dominated by Japan, which is home to some of the world’s largest catastrophe reinsurance placements.

According to AON, the challenging renewal represented a material hardening for property catastrophe reinsurance programs in Asia Pacific, a market that has historically been more insulated from the global reinsurance cycle. The renewal was orderly, and programs were placed as per expectations.

Pricing cycles in the commercial insurance and reinsurance sectors are now converging, marked by price increase moderation overall for the former, albeit with strengthening in challenged areas, and rapid acceleration (dislocation even) for the latter (see How Global Reinsurance Market Endured a 2023 Renewals?).

Orderly reinsurance renewal

Orderly reinsurance renewal

Reinsurers entered the renewal with clarity around their catastrophe risk appetite, including very limited appetite for aggregate catastrophe coverage, and informed insurers anticipated the retention and price adjustments necessary to achieve their desired placement outcome, according to Reinsurance Market Dynamics Report Q1 2023.

The re-pricing of catastrophe risks seen at 1/1 continued at April 1, although outcomes were moderated by local market dynamics, and a more measured approach taken by many reinsurers.

Property catastrophe capacity was adequate at April 1, but at a price. APAC experienced meaningful rate increases and adjustments to retentions (see Challenging Reinsurance Renewals & Great Realignment). The catastrophe market in Japan, in particular, benefited from robust pricing levels established in the wake of large quake and windstorm losses.

U.S.: crop reinsurance capacity constrained

U.S.: crop reinsurance capacity constrained

Only a handful of US catastrophe programs renew in March and April, so meaningful trends cannot be drawn ahead of the important mid-year renewals. Risk-adjusted pricing increases were largely in line with the January renewals, although with more certainty regarding terms and conditions.

There were also encouraging signs of capacity becoming available as reinsurers consider opportunities in the current market. However, reinsurers will want to see good returns for prolonged market stabilization.

US crop renewals were generally concluded later compared to recent years, as clients closely watched the market to ensure they could negotiate optimal terms.

Reinsurers were more selective in how capacity was deployed, with some authorizing on stop loss programs subject to reduced limit ‘buffers’ and increases to minimum and deposit premiums. This meant cedants had to take great care in estimating their premium so reinsurers did not waste any capacity.

Reinsurers with diversified stop loss portfolios were generally profitable in 2022. However, the continued rise in commodity prices and the strength of the US dollar meant that more capacity is required for the 2023 programs.

The exit of a major reinsurer, a reduction in pro-rata capacity, and a large Brazilian loss from 2022 meant that there was reduced supply of capacity.

Crop underwriters also had to compete with their property colleagues (a line that was seeing significant improvements in expected returns) for capital. As a result, price increases were necessary at renewal in order to fully place programs.

Asia Pacific: pragmatic outcome in challenging reinsurance market

Asia Pacific: pragmatic outcome in challenging reinsurance market

The April 1 renewal progressed in an orderly fashion in Asia Pacific, as the reinsurance market found itself on a more sustainable footing. Following a turbulent January 1, reinsurers and insurers in APAC navigated a challenging environment to achieve a pragmatic outcome at the April renewal.

April 1 is a notable renewal for the APAC region, dominated by Japan, a globally important insurance market, and home to some of the world’s largest catastrophe reinsurance placements.

There are also significant renewals in South Korea and India, including major crop reinsurance programs.

Some countries in APAC have historically been somewhat immune to the reinsurance market cycle. And while the demand-supply dynamics that shaped the January renewal continued into April, the consequences were more moderate.

Capacity was sufficient to meet demand, and while there were few new entrants in APAC, many established reinsurers were willing to deploy more capacity.

Pricing for catastrophe covers and retention levels increased, but not to the levels seen in the US and Europe at January 1. Japan, in particular, benefited from price corrections implemented in response to recent catastrophe events.

Across the region, insurers also leveraged catastrophe modelling and analytics to present a custom view of risk, helping to attract capacity and negotiate more favourable terms.

Attention now turns to mid-year property catastrophe renewals in APAC, in particular Australia and New Zealand, which have both experienced unusually large catastrophe events since the last renewal. Although challenging, we anticipate capacity available at a price at the mid-year renewal for the APAC region.

Japan: robust reinsurance pricing moderates global cat impact

Japan: robust reinsurance pricing moderates global cat impact

April 1 is the key renewal period for Japan, with more than 95% of reinsurance renewing, including some of the world’s largest catastrophe programs. As a major catastrophe reinsurance market, and one of the world’s largest property, casualty and marine insurance markets, the Japanese renewal is of global significance.

Following a turbulent January renewal that saw the re-pricing of property catastrophe risk in the US and Europe, April renewals in Japan.

While a meaningful hardening took place at April 1, the impact was moderated by already robust property catastrophe pricing and a return to more stable market conditions, with some reinsurers ready to deploy additional catastrophe capacity at April 1.

Risk-adjusted rates for catastrophe excess of loss increased by low double digits – a substantial increase, but significantly below price rises in the US and Europe at January 1.

Retentions and attachment points also increased, but again, more moderately than at January 1. Minimum rate-on-line increased, but remain relatively low compared namely to the US, while aggregate covers have further decreased. Terms and conditions were also a feature, with reinstatements under pressure.

South Korea: challenging reinsurance renewal terms continued

South Korea: challenging reinsurance renewal terms continued

The renewal was slow and somewhat frustrating for insurers in South Korea as the challenging market conditions of January 1 continued at April 1, despite several reinsurers entering the market.

April 1 is the second largest reinsurance renewal for South Korea’s insurers, with around 40% of the book renewing.

The renewal followed a difficult January 1, in which reinsurers sought to restore ‘price adequacy’ following a series of large risk losses coupled with natural catastrophe losses in 2022.

Property catastrophe and per risk excess of loss rates increased significantly at April 1, and commissions on proportional reinsurance came under pressure, as reinsurers responded to last year’s windstorm and flood losses.

The cost of proportional cover could cause insurers to reconsider the value of the product, and potentially shift to excess of loss reinsurance at future renewals, resulting in higher net retentions.

India: minimum risk rate & reinsurers reward performance

India: minimum risk rate & reinsurers reward performance

India non-agribusiness

April 1 is the main renewal for India, and one that sees almost all the country’ property/casualty insurers purchase reinsurance protection, across all lines of business, according to Indian Insurance Market FY2022 Results.

This year’s renewal was dominated by the issue of minimum risk rates, as well as the re-pricing of natural catastrophe risks, continuing the trend seen at January 1.

Property catastrophe pricing increased by double digits, a significant uplift for the Indian market by historical standards, and higher than those seen in Japan. Casualty and agriculture, by contrast, were stable.

India agribusiness

Asia Pacific accounts for around 40% of global agriculture reinsurance premium, with India accounting for the majority share. The country is one of the world’s largest agriculture insurance markets behind the US and China. Strong growth prospects and good performance have ensured continued reinsurer support at the April renewal.


AUTHORS: George Attard – CEO of APAC, Philippe Sommer – CEO Japan, YB Lee – Managing Director Korea, Alistair Sounes – Senior Advisor South Asia, Shailendra Sapra – Agriculture Leader Asia Pacific, Chris Coe – Global Agriculture Leader, Dave Ott – U.S. Agriculture Leader, Paul Anderson – U.S. Property Leader at AON Reinsurance Solutions

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