The January 2023 renewal was the most challenging in a generation, as the reinsurance market underwent a fundamental shift in pricing and risk appetite, especially for property catastrophe risk, according to Aon.\r\n\r\nIn its report Reinsurance Market Dynamics January 1, 2023, Aon said the renewal marks a turning point for the reinsurance market, signalling a new reality for buyers. It was characterised on the property side by pricing increases, narrower coverage definitions and more excluded perils.\r\n\r\nPricing for US property catastrophe and global property retrocessional business hit multi-decade highs, and reinsurers moved away from frequency layers and sought to redraw the scope of property catastrophe protection, the broker says in the report. Terms and conditions came under considerable pressure, as reinsurers sought to delineate and clarify coverage. However, Aon notes that clients were able to purchase the reinsurance protection they need, securing core coverages, albeit at significantly higher rates and retentions.\r\n\r\nIn the report, Joe Monaghan, global growth leader reinsurance solutions, Aon, says: \u201cWhile capacity was constrained, fears of a major capacity crunch in the wake of Hurricane Ian were not realised. Insurers responded to market dynamics by adjusting increased retentions and scaled back demand for additional limit, while improved pricing helped free up additional reinsurance capacity as the renewal progressed.\u201d\r\n\r\nHe adds: \u201cMeaningful new capital did not enter the market in advance of January 1. In late December we saw encouraging signs that reinsurers were looking to take advantage of improved conditions, although the capacity entering the market at January 1 fell well short of withdrawals earlier in the year. New capital may flow into the reinsurance market in the first quarter, attracted by the certainty of returns and improved underwriting conditions that were established at the renewal.\u201d\r\n\r\nIn general, almost all markets were affected by significant rate increases and structural changes to programmes, says Aon. Risk-adjusted rate-on-line increased substantially in both North America and Europe, and markets in Asia and Latin America were not immune from market dynamics, says Aon, although price increases and changes to programme structure and terms were often less pronounced.\r\n\r\nIt was a different story for the casualty market, which according to Aon remains generally stable relative to other reinsurance markets, although it says renewals in January were complicated by the demand-supply mismatch in property catastrophe. Capacity in the casualty reinsurance market was plentiful, as reinsurers demonstrated an increased appetite for the class. \u201cWhile some reinsurers pushed for improved terms at January 1, the balance of power remained with buyers,\u201d Aon states.\r\n\r\nLooking at specialty lines, the aviation market experienced its most challenging renewal in over two decades, with significant rate increases and coverage restrictions, the report reveals. It is set to remain an uncertain market and reinsurers are likely to seek higher retention levels from some clients at future renewals.\r\n\r\nMarine reinsurance renewals were among the most complex and challenging of the past two decades, especially around pricing, composite structures, nat cat and coverage for war, political violence and aviation war, Aon says.\r\n\r\nThe cyber reinsurance market continues to see new players but additional capacity, both from traditional and alternative capital sources, will be required to meet future demand for cyber reinsurance, according to Aon. \u201cA consequence of hardening in the cyber insurance market is increased demand. While most cyber insurers reduced their exposure in the past two years, many are now looking to resume growth, which will further increase demand for cyber reinsurance,\u201d the broker states.\r\n\r\nOne brighter area is trade credit, structured credit and political risk, and surety reinsurance treaties, which Aon says were completed with relatively little disruption to structures, terms and conditions, and panel compositions. \u201cWhile the wider market challenges had an impact, the recent positive results of these classes in the 2020, 2021 and 2022 underwriting years helped mitigate the desire of reinsurers to price programmes higher, and the growing geopolitical and economic uncertainty,\u201d the reports states.