Mid-year reinsurance renewals have further consolidated the positive trends at 1/1 and 4/1, setting the stage for a more competitive reinsurance market in 2025. However, the market emerging from last year’s global reset is more dynamic so the ability to make informed decisions quickly, supported by data and analytics, will be key to navigating the market going forward.

According to AON Reinsurance Market Report, June 1 and July 1 are significant renewals for the U.S. especially Florida, Latin America as well as Australia and New Zealand.

Discover global reinsurer capital, alternative capital and rating agency perspectives on the macroeconomic environment for insights on the potential direction of the global re/insurance industry and future renewals.

Coming at the start of the Atlantic Hurricane season, and at a critical stage in the reinsurance market cycle, these catastrophe-focused renewals are also of global significance.

Overall, insurers achieved positive renewal outcomes at mid-year renewals, with property catastrophe risk-adjusted rate reductions and improvements in terms and/or coverage.

Top Tips for a Successful Reinsurance Renewal

Top Tips for 2024 Reinsurance Market Renewals
  • Portfolio Differentiation. Clearly articulate your pricing and underwriting strategies, and its impact on your risk profile to differentiate your portfolio.
  • Custom View of Risk. Develop a custom view of risk to de-risk and reduce exposure concentrations, improve your understanding of secondary perils and emerging risks, and optimize your placement strategy.
  • True Cost of Capital. Leverage strategic consulting and analytics to refine risk appetite, adjust investment and underwriting strategies, or review business lines.
  • Alternative Structure and Advocacy. Consider third-party and alternative capital for optimal placement results.
  • Legacy Reinsurance Solutions. Explore structured reinsurance covers and legacy reinsurance solutions to manage volatility and free up capital to support growth opportunities.

U.S. Nationals, Florida and Latin America Re/insurance Market

U.S. Nationals, Florida and Latin America Re/insurance Market

In contrast to renewals of 2023, capacity for U.S. catastrophe exposed property business was more than ample to meet increased demand, with upwards of $10 bn of additional limit purchased by U.S. insurers at mid-year along with insurers that elected to secure additional capacity following January 1 renewals.

Renewals on June 1 and July 1 continued to build on the positive momentum of 1/1 and 4/1, with increased appetite from traditional reinsurance and ILS markets resulting in downwards pressure on pricing for both U.S. nationals and Florida specialist insurers.

Competition remained most intense at the high end of programs. However, reinsurers showed increased interest in supporting a wider range of programs at mid-year renewal.

They also displayed growing flexibility around secondary perils, though interest in traditional aggregate covers stayed limited. U.S. insurers saw risk-adjusted price reductions from mid-single digits to low-double digits.

Florida experienced a shift. After years of steep reinsurance rate hikes, low catastrophe activity and improved results led to mid-year rate reductions for the first time in three years.

There was ample capacity to support approximately $2 bn in additional reinsurance purchases. This reflected continued exposure growth, the end of temporary state-reinsurance support, and more purchasing by Citizens Insurance Property Corp, Florida’s insurer of last resort.

Renewals in Latin America and the Caribbean were also positive at mid-year. Capacity met demand for the first time in two years, with risk-adjusted rates flat to single-digit increases.

However, losses from Hurricane Otis, the strongest landfalling hurricane in the Eastern Pacific, pressured pricing and retentions in Mexico. In Brazil, devastating floods earlier this year highlighted catastrophe exposures for insurers.

Australia and New Zealand Re/insurance Market

Australia and New Zealand Re/insurance Market

Insurers in Australia and New Zealand also saw the return to stable market conditions at the mid-year, a key renewal date for the region with around 80% of property catastrophe reinsurance renewing.

Relatively benign catastrophe losses in Australia and New Zealand over the past 12 months enabled a more predictable renewal at the mid-year 2024, with reinsurers clearly signaling renewed appetite for catastrophe risk in the region.

As a result, capacity at mid-year 2024 was more than adequate to meet demand, with pricing anticipated to be flat on a risk-adjusted basis, with many insurers experiencing reductions in the low-single digits.

Casualty holds steady

U.S. and international casualty renewals at the mid-year were broadly stable and in line with those at 1/1. Casualty rates were generally flat to single-digit increases on a risk-adjusted basis, although casualty accounts with prior-year loss development, D&O and U.S. exposed international casualty business, all came under increasing pressure.

The market’s view on the frequency of severe losses and U.S. social inflation has shifted significantly, making it a key focus of renewal discussions. Despite this, capacity remains sufficient, and casualty rates and underwriting actions are improving.

Cautious Optimism

With hurricane season approaching, the outlook for 2025 renewals appears promising. Total reinsurance industry capital reached a new high of $695 bn in Q1 2024, surpassing peak levels from 2021. This growth stems from retained earnings, recovering asset values, and new inflows to the catastrophe bond market.

Reinsurers show more confidence in pricing levels and structures compared to last year, reflecting a stronger appetite for catastrophe business.

They are generating healthy returns, with an annualized ROE averaging around 20% in the first quarter. If catastrophe losses in the latter half of 2024 remain controlled, this could boost capital levels and drive competition.

Property Catastrophe Bonds

Property Catastrophe Bonds
Source: Aon Securities

However, the market stays disciplined and price-sensitive. Retention levels, which significantly increased at last year’s renewal, have largely remained unchanged mid-year. The dynamic risk environment, particularly secondary peril losses in property and social inflation in casualty, is likely to maintain this discipline into 2025.

Hurricane Season Jitters

Natural catastrophes in 2024 have not yet significantly impacted reinsurers’ results, despite the substantial increase in insurer net retentions last year.

Catastrophe losses in the first half of this year are lower than in recent years, but insurers are retaining more of these losses due to increased catastrophe retentions. This situation presents an opportunity for reinsurers to deploy excess capital.

Aon’s Global Catastrophe Recap report in July will provide a detailed analysis of natural catastrophe insured loss trends. The full-year outlook may change with the ongoing Atlantic hurricane season.

In April and May, seasonal forecasts – including those from the U.S. National Oceanic and Atmospheric Administration (NOAA) and Colorado State University – predicted an extremely active Atlantic hurricane season in 2024, driven by near-record warm sea temperatures in the Atlantic Ocean and the development of La Niña conditions in the Pacific.

The forecasts triggered a tightening of pricing and capacity in the later stages of the mid-year renewal, as well as greater scrutiny of hurricane exposures by ILS investors. The next few months will be critical to the outlook for renewals in 2025.

One outsized hurricane loss, or a series of U.S. landfalls, this season may yet see a revision to more challenging market conditions.

Surplus capital creates opportunities

Surplus capital creates opportunities

At mid-year renewals, reinsurers showed more willingness to discuss insurers’ property portfolios. They offered increased flexibility on attachment points and ancillary covers.

Selectively, opportunities are emerging to address aggregate exposures in property, with rising interest in traditional sideways cover, quota share, and multi-year coverages in the structured solutions market.

Reinsurers see growing opportunities to support insurers, especially in the fast-expanding excess and surplus lines market.

Insurers are turning to the non-admitted market for solutions to more challenging perils. Florida’s homeowners’ property market is also expected to see increased reinsurance demand. This follows 2023 reforms aimed at reducing frivolous claims litigation and the shedding of policies by Citizens.

U.S. national and super-regional insurers may look to purchase additional cover in the second half of 2024 and into 2025 to help manage volatility from increased retentions and/or support growth.

There are also good opportunities for reinsurers to support regional insurers, where conversations are turning to strategic growth opportunities, future affiliations and potential mergers and acquisitions.

Inflation is trending down in all major markets, however, reaching the U.S. Federal Reserve’s target of 2% has proven difficult. The market now expects the Fed to cut rates once or twice this year.

Lower lending rates could rejuvenate the mortgage market, which in turn would stimulate increased demand for mortgage reinsurance, which has provided the market with an attractive diversifying growth opportunity in previous years.

There is also growing demand for reinsurance capital – and room for new players – in the credit and surety space, driven by regulatory changes and growth in underlying business across several product lines and regions.

Differentiation and data key in a dynamic market

Top Tips for a Successful Reinsurance Renewal

Differentiation remains critical to achieving optimal renewal outcomes in both property and casualty markets. Capital continues to be selective and price sensitive, while insurers are mindful of natural catastrophe volatility and emerging loss trends in casualty lines.

The ability of an insurer to communicate their needs and strategy clearly, and demonstrate actions taken to improve the quality of portfolios, has never been as relevant.

The reinsurance market post-2023 reset is more fluid and sensitive to shifts in demand. Insurers who renewed early mid-year saw increased pricing competition and overplacement due to tightening capacity at renewal’s end, influenced by forecasts of an active hurricane season.

If these forecasts do not result in significant insured losses, reinsurers might have extra capital available later this year.

Mid-year renewals highlighted the need for continuous communication and engagement with the market and advisors.

Well-prepared buyers who can make quick, data-driven decisions will be best positioned to take advantage of market fluctuations and changes in reinsurer appetite.


AUTHORS: Paula Ferreira – CEO Latin America – Aon Reinsurance Solutions, Steve Hofmann – co-President U.S. – Aon Reinsurance Solutions, Kevin Traetow – co-President U.S. Aon Reinsurance Solutions

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