The report reveals that insurers generally achieved positive mid-year renewal outcomes, which included rate reductions for property catastrophe risk and improvements in terms and coverage. While a more competitive reinsurance marketplace was observed, the landscape remains somewhat dynamic due to volatility in secondary peril losses in property, heightened Atlantic hurricane season forecasts, social inflation and adverse reserve development in casualty.
In contrast to 2023, mid-year capacity for U.S. catastrophe-exposed business was more than ample to meet increased demand, with upwards of $10 billion of additional catastrophe limit purchased by U.S. insurers. 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.
Meanwhile, renewals in Latin America and the Caribbean were also broadly positive for insurers, with ample capacity to meet demand and risk-adjusted flat, to single-digit rate increases. Insurers in Australia and New Zealand also experienced stable market conditions, as around 80 percent of their property catastrophe reinsurance business renewed at mid-year.
The report, which aims to drive better business decisions, will reveal that total reinsurance capital reached a new record of $695 billion by the end of Q1 2024, increasing from $670 billion at year-end 2023. 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 will 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, 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.”
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.”
Aon’s Reinsurance Market Dynamics July 2024 report
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