Mid-year reinsurance renewals see downward pressure on rates, says Aon

A more competitive marketplace at mid-year renewals and increased appetite from both traditional reinsurance and ILS is creating downward pressure on pricing for US insurers, including Florida specialists that saw rate cuts for the first time in three years, according to Aon.

Ahead of publication of its June/July reinsurance report on 1 July renewals – key for insureds in the Americas, Australia and New Zealand – Aon said generally positive mid-year reinsurance renewals saw rate reductions for property catastrophe risks as well as improving terms and coverage.

Insurers in Latin America and the Caribbean saw reinsurance renew at flat to single-digit rate increases, with ample capacity to meet demand. About 80% of insurers in Australia and New Zealand renewed property catastrophe reinsurance at mid-year, with Aon reporting stable market conditions.

Overall reinsurance capacity at mid-year renewals was “more than ample”, in contrast to last year, according to Aon, as more competition returned to the marketplace. Capacity for US cat-exposed business met increased demand, with upwards of $10bn of additional catastrophe limit bought by US insurers, it said.

Aon said total reinsurance capital reached a new record high of $695bn in Q1 2024, up from $670bn at year-end 2023. ILS capital increased to an all-time high of $110bn through Q2, Aon said, from $109bn at year-end 2023, with a record $46bn of catastrophe bond limit on-risk.

However, the market landscape is described as dynamic, given continued volatility in secondary peril property losses, Atlantic hurricane season forecasts, social inflation and adverse reserve development in casualty.

Steve Hofmann, co-president of US Reinsurance Solutions at Aon, said: “We are pleased to see the ongoing stability of the reinsurance market, which now presents profitable growth opportunities for both insurers and reinsurers. 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.”