Aon reports that the 1.4 renewals have sustained favourable conditions for cedents, consistent with the trends observed during the 1.1 renewals.
The global broker also highlighted a ‘dramatic shift’ toward ample property catastrophe reinsurance capacity, driven by “attractive levels of risk-adjusted returns, having been experienced over the past 12 months.”
“The April 1st reinsurance renewals were more predictable and generally favourable to reinsurance buyers,” George Attard, CEO of Asia Pacific for Aon’s Reinsurance Solutions, said, commenting on a report due to be published on Tuesday (2nd April).
The 1.4 renewals are a crucial renewal period for the Asia Pacific region, with significant catastrophe programs in Japan and large portfolios in South Korea, China, and India undergoing renewal.
In Japan, property catastrophe renewals have seen prices remain stable or slightly decrease, a trend consistent with what was observed in the U.S. at the January renewals, Aon said. Increased competition for catastrophe business has also been noted in South Korea, China, and India, to varying degrees.
However, across the Asia Pacific region, certain markets and product lines are facing challenges, with a tightening in terms and conditions. “[This included] property per-risk reinsurance; industrial fire accounts; certain natural catastrophe loss-affected regions; and U.S. exposed casualty treaties,” Aon said in a release.
Looking ahead, Attard said that, as mid-year renewal gets underway for the catastrophe-exposed markets of Florida, Australia and New Zealand, reinsurers are indicating a strong appetite for catastrophe risk.
“We would expect the positive trend of the January and April renewals to continue at mid-year renewals, with adequate capacity for property catastrophe risks and enhanced pricing competition. Insurers looking to purchase additional limit will also find adequate capacity to meet their needs,” Attard said.
Fac growing
Aon noted that reinsurers are showing a keen interest in facultative business at the April renewals, a risk transfer solution that has not traditionally been used widely in Asia Pacific.
In March, industry experts spoke to (Re)in Asia about the rising interest in fac solutions in APAC, with firms like Gallagher and Aon expanding their operations in the region. The trend is being driven by a number of factors, including the hard market and a desire for more support for complex risks such as offshore wind and nuclear.
Aon also spotlighted India as a country offering new opportunities for reinsurers. The country is expected to be the fastest-growing insurance segment among G20 countries over the next five years and the regulatory is actively seeking to attract more reinsurance companies to its market to support its expanding market.
The Insurance Regulatory and Development Authority of India (IRDAI) has embarked on a series of overseas trips to promote the benefits of India as a reinsurance hub and has introduced measures such as lowering capital requirements and revising order-of-preference rules, alongside efforts to make GIFT City an appealing base for reinsurers.
Reinsurance capital resurgence
Aon also reported global reinsurance capital at US$670bn, nearing the peak levels of 2021.
This resurgence is credited to strong reinsurer results, a recovery in asset values in 2023, and a historic period for the insurance-linked securities (ILS) market, which saw a seven% increase in capital to US$108bn at year-end 2023 — an all-time high.
Despite global natural catastrophe insured losses amounting to US$118bn in 2023, reinsurers have reported strong performances, supported by elevated reinsurance pricing and higher cedent retentions.
“Early analysis suggests that global reinsurers posted an average combined ratio of around 90 percent and an average return on equity of around 18 percent, representing one of the sector’s best ever results,” Aon said.
