January renewals ‘smooth’, demand for property coverage increases: Aon

Despite challenges in regions with significant losses in 2023, pricing pressure on upper layers varied by region.

The 1 January, treaty renewal proceeded smoothly, buoyed by improved profitability, capital rebuilding, and increased retrocession capacity. Many reinsurers, encouraged by enhanced terms established in 2023, displayed heightened appetites. 

The January renewal sets the stage for an interesting year, with continued demand for property catastrophe reinsurance and opportunities for insurers and reinsurers to navigate challenges collaboratively.

Despite uncertainties about climate change, inflation, litigation funding, and geopolitical risks impacting ultimate loss costs, higher primary insurance pricing provided support in most areas. 

However, these unknowns are keeping potential new investors cautious.

For cedents, the year was challenging, with eroded capital buffers and higher retentions forced by reinsurers in 2023. 

Insured losses from natural catastrophe events were elevated, further impacting capital and increasing rating agency scrutiny. This led to increased demand for reinsurance protection going into 2024.

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In property treaty renewals, demand remained robust, with catastrophe limit purchases globally up by low to mid-single digits year-on-year. 

Reinsurers sought to grow in property catastrophe reinsurance, and appetite for peak perils and upper layers was generally strong. Despite challenges in regions with significant losses in 2023, pricing pressure on upper layers varied by region.

Casualty treaty renewals saw varied reinsurer risk appetites, with some adopting a tougher stance. Capacity remained ample, and programs were completed in line with or better than expectations. 

General casualty excess of loss business renewed with mid-single digit risk-adjusted rate increases on average.

Regional insurers, especially in the US, faced challenges due to record severe convective storm losses. Discussions during renewals focused on finding a market-clearing price rather than capacity at any price. Reinsurers used market conditions to revisit portfolio construction and carrier partners.