Reinsurers Demonstrate Flexibility Amid Strong Market Growth, Aon Reports

According to Aon's "Reinsurance Market Dynamics January 2025 Renewal" report, reinsurers exhibited increased flexibility during the January 1 renewal period, underpinned by a robust expansion in available capacity following another year of strong results. This flexibility allowed cedants to align coverage more effectively while securing additional protection in a dynamic market environment. 

Per the report, global reinsurer capital reached a record $715 billion as of September 30, 2024, marking a $45 billion increase compared to the previous year. This growth was driven largely by retained earnings and further supported by easing retrocession market conditions. 

In the property sector, cedants with loss-free programs were able to secure catastrophe coverage on incrementally improved terms. Reinsurers' desire to grow created opportunities for buyers to align coverage and purchase additional protection. Following Hurricanes Milton and Helene, insured losses from global natural catastrophe events are expected to exceed $140 billion in 2024. Renewal impacts were largely confined to the most affected local markets, notably Canada, Central and Eastern Europe, and the United Arab Emirates. 

Casualty renewals were broadly stable overall, even in the United States, where robust underlying insurance pricing helped to offset reinsurer concerns around adverse claims and litigation trends. Individual cedant outcomes varied, depending on loss experience, business mix, and data quality. Reinsurers focused on managing social inflation risks and reassessing strategies to address systemic litigation issues. 

Most reinsurers continue to view specialty business as a source of diversifying growth. January renewal outcomes varied depending on the class of business and loss activity, but pricing was generally stable to slightly lower, with a modest easing of other terms and conditions in some areas. Alfonso Valera, co-CEO over Europe, the Middle East, and Africa at Aon's Reinsurance Solutions, said, "We observed an increased level of appetite in high margin lines of business and regions at the January 1 renewals, driven by reinsurers that desired improved signings across a broad swath of insurer clients. Many reinsurers need to revisit how they articulate and deliver value to clients in a sustainable, profitable manner, as now is the time to unleash financial and intellectual capital to help insurers grow profitably and expand their offerings to sustain a healthy market." 

Aon's report also shed light on the increased deployment of alternative capital, which reached an all-time high of $13 billion in 2024. The total catastrophe bond market surged to $107.1 billion, reflecting an 11 percent annual increase. This trend underscores the growing role of alternative capital in complementing traditional reinsurance solutions. 

Looking forward, Tomas Novotny, co-CEO over Europe, the Middle East, and Africa at Aon's Reinsurance Solutions, said, "During the January renewal season, reinsurers demonstrated a strong appetite for writing business in this current hard market, and most renewals resulted in meaningful over-subscriptions. Reinsurers are clearly trying to maximize the scale of the business written with great return-on-equity potential, and the most successful are those that are able to meet clients' needs holistically, across their portfolios, and across the board on their catastrophe programs. The market's willingness to deploy its capacity in support of currently unmet need will define the sector's long-term relevance, and we should all remember that reinsurance is not just a transaction; it's about partnering with insurers and helping them grow."