Reinsurers Urged To Embrace Risk To Support Clients and Market Stability

Aon plc has released its Ultimate Guide to the Reinsurance Renewal—September 2024 report, underscoring the reinsurance sector's strong financial performance amid growing insurer losses and increasingly complex risks. Despite substantial natural catastrophe losses, reinsurers have maintained solid returns, revealing opportunities for growth and market sustainability.

Aon's report notes that the global insurance premium to gross domestic product ratio has stalled at 1.8 percent since 2010 despite increased exposure and unmet client needs. Although reinsurance payouts for natural catastrophes reached $58 billion in the first half of 2024—above the decadal average of $47 billion—reinsurers achieved an average return on equity of 17.6 percent, with some exceeding 25 percent.

Reinsurer capital hit a record $695 billion by mid-2024, driven by retained earnings, catastrophe bond inflows, and rising asset values. Investment yields also improved to 3.8 percent in the first half of the year, compared to 3.1 percent in 2023.

Pricing pressures eased during 2024 renewals, with increased competition from alternative capital reaching $110 billion. Aon predicts further rate reductions and greater flexibility in 2025.

Rupert Moore, UK CEO of Reinsurance Solutions for Aon, said, "If the reinsurance market is to provide real value, it must play a more active role in helping insurers to manage frequency losses and earnings volatility. If reinsurers continue to run from risk, it will force insurers to follow suit and we will all become part of a shrinking, and less relevant industry."

The report also reflects on significant losses in 2024, including events like the Baltimore bridge collapse and global airline and earthquake incidents, emphasizing the need for the industry to adapt to interconnected risks.