(Re)in Summary
- Asian renewals at 1 January look set to stay orderly and buyer-friendly, with further rate cuts as reinsurers post strong earnings and deploy more capital in the region.
- Cedents are using savings to buy more limit, cut volatility, revisit retentions and reinstate covers dropped in the hard market, with growing interest in aggregate, earnings and multi-year covers.
- New capacity is pushing incumbent reinsurers to sharpen pricing and terms, with appetite strongest for clean property cat, infrastructure and specialty business, and spreading to Southeast Asia and new energy.
- Reinsurers still hold the line on discipline: loss-hit accounts, Thailand cat and secondary perils face tougher talks, and cedents with strong portfolios and data will gain most.
As with the past couple of years, renewals in Asia at 1 January are likely to be orderly and buyer-friendly, with further rate reductions anticipated amid strong reinsurer earnings.
However, while previously cedents took advantage of softening conditions to offset rate increases of 2023 and 2024, this year the emphasis is shifting towards better alignment with evolving risk and capital needs.
“Price is always a key consideration, but we see the conversations shifting,” says Soeren Soltysiak, CEO Asia, Reinsurance Solutions for Aon. “Clients are now actively considering utilising achieved savings to make strategic purchases to add additional limits, reduce volatility, revisit retentions and reinstate covers that became less economical during the harder market.”
Greater interest is being shown in “aggregate covers, earnings protection and multi-year structures”, says Soltysiak. This is particularly relevant for Asia, where needs around growth, catastrophe accumulation and regulatory capital differ materially by market.
“It is important to have a programme in place that better aligns protection, capital and growth plans over the cycle,” says Soltysiak.
“Price is always a key consideration, but we see the conversations shifting.”
Soeren Soltysiak
CEO Asia, Reinsurance Solutions for Aon
Shifting priorities
Signs of this shifting conversation were evident during the Monte Carlo Rendez-Vous that took place at the start of September – and show how approaches in Asia are diverging from those in Europe and the United States.
While many global discussions still centred on pricing adequacy and capital deployment, Asian cedents were more preoccupied with how cheaper reinsurance can support business expansion and product innovation in the region.
This is especially important given the complex world that the insurance industry now inhabits.
“Increasingly, the focus is on how that capacity can be deployed to help insurers navigate a more complex and uncertain risk environment,” says Roshan Perera, Gallagher Re’s APAC CEO. “That complexity is being driven by a combination of evolving climate-related exposures, growing interconnectivity of supply chains, geopolitical uncertainty, rapid technological change and the emergence of new risk categories associated with AI adoption, digital infrastructure and data centres.”
“The combination of strong reinsurer capital positions and improving confidence in portfolio performance has increased appetite across much of Asia.”
Roshan Perera
Gallagher Re’s APAC CEO
Stepping up capital deployment
Market conditions have been favourable for cedents for the past couple of years. However, they are becoming even more so as reinsurers continue to step up their deployment of capital in Asia.
This is further strengthening buyers’ bargaining power and reinforcing the opportunity for insurers to take a more strategic approach to price reductions.
“The combination of strong reinsurer capital positions and improving confidence in portfolio performance has increased appetite across much of Asia. The region continues to attract significant interest because of its long-term growth fundamentals, including expanding economies, rising insurance penetration and increasing demand for risk transfer solutions,” says Perera.
He adds that strong interest is being seen across a range of sectors, particularly where insurers are seeking “support for growth, innovation and capital optimisation”.
This includes emerging opportunities linked to digital infrastructure, data centres, AI-enabled businesses and the broader technological transformation taking place across many Asian economies.
“As a result, markets where insurance penetration is still low are attracting significant attention and interest from reinsurers.”
Wang Wei
Chairman, Rare Earth Insurance Partners
From the reinsurance side, competition is intensifying as abundant capacity and new market entrants put pressure on underwriters to offer more competitive pricing and terms to retain their share of business.
“Negotiations are expected to run relatively smoothly, for those with fairly good loss record for sure,” says Wang Wei, chairman of Rare Earth Insurance Partners. “The existing underwriters have to offer competitive pricing and improved terms, otherwise their share can be replaced by new capacities easily.”
Wang says that reinsurer appetite is strongest for well-performing business supported by reliable data, while less penetrated markets and emerging sectors are also attracting interest.
“The strongest appetite is still for those property catastrophe, infrastructure and specialty lines with a fair loss record and robust data,” says Wang. “However, it is impossible for all reinsurers to have a chance to participate. As a result, markets where insurance penetration is still low are attracting significant attention and interest from reinsurers. For example, Southeast Asian markets from a geopolitical perspective, and renewable energy from a product perspective.”
In China, this interest in emerging sectors is reflected in cedents’ efforts to expand protection for risks associated with electric vehicles, solar photovoltaics and onshore and offshore wind. The growing demand for cover in these areas highlights the evolving risk landscape as new energy becomes an increasingly important growth sector.
“The most successful outcomes this renewal season are unlikely to come from achieving the largest headline rate decrease [but] from using today’s market to improve capital efficiency, reduce volatility [and] strengthen balance sheets.”
Tom Wakefield
Gallagher Re, CEO
Selective opportunity
However, competition for business does not mean reinsurers are willing to compromise on underwriting discipline. Loss-affected accounts and more challenging lines and perils, such as Thailand property catastrophe and secondary perils, are likely to face tougher negotiations, with pricing reflecting individual risk profiles and claims experience.
“Reinsurers remain focused on deploying capital to portfolios that demonstrate strong underwriting fundamentals, clear strategic direction and robust risk data. The challenge is increasingly not the availability of capital, but ensuring that capital is matched effectively to increasingly complex and evolving risk profiles,” says Perera.
Against this backdrop, cedents will need to position themselves to take full advantage of the capacity available, demonstrating the quality of their portfolios and the strength of their risk management. At the same time, they need to make sure that their reinsurance programmes are aligned with evolving exposures and business priorities in an increasingly complex environment.
As Gallagher Re CEO Tom Wakefield noted on the sidelines of the Monte Carlo Rendez-Vous: “The most successful outcomes this renewal season are unlikely to come from achieving the largest headline rate decrease [but] from using today’s market to improve capital efficiency, reduce volatility [and] strengthen balance sheets.”
