Reinsurers step up at 4-1; rising capacity hints at mid-year easing: Aon

Reinsurers have pushed more capacity onto key property cat markets at the April 1 reinsurance renewals, putting downward pressure on select pricing and offering strong signals of a further tempering of the hard market at the pending mid-year renewals, analysts at global re/insurance brokerage Aon have claimed. 

The just-completed 4.1 reinsurance renewals brought “a dramatic shift in supply” which brought out “ample capacity” as reinsurers gave continued acknowledgement to the “attractive levels of risk adjusted returns” in property cat following the 2023 market reset, Aon analysts wrote in their first-view to the April renewals.  

“With attractive returns, reinsurers have turned their attention to growth, increasing competition for higher catastrophe layers.”

While varying by market and exposure, the overall trend in reinsurer capacity and appetite bodes well for the cat-heavy mid-year renewals with their much-watched Atlantic and Gulf hurricane exposures plus other key cat regions. 

“As mid-year renewals get under way for the catastrophe exposed markets of Florida, Australia and New Zealand, we would expect the positive trend of 1/1 and 4/1 to continue, with adequate capacity for traditional occurrence property catastrophe risks and enhanced pricing competition,” analysts wrote. Expect more “downwards pressure on pricing” and “broader coverage terms and conditions,” but with little chance for any backtracking on retentions, a focal point of reinsurer gains in the 2023 market reset.

For the core 4.1 market of Japan, capacity proved “more than ample,” chiefly as existing players showed “renewed confidence and sought to grow” in property cat. Demand, in turn, looked “broadly stable.”  Amid over-placements, mark risk-adjusted property cat pricing somewhere between “flat to slightly reducing”.

The Japanese per-risk XoL and pro-rata non-cat property markets didn’t have it quite as easy. Reinsurers are said to be hard on recent fire losses and press T&C and the removal of cat cover from per-risk deals. 

Elsewhere in Asia, South Korea, China and India were said to have enjoyed increased competition for catastrophe business.

South Korea enjoyed a “stable market” and “predictable renewal”. Property cat capacity was called “more than adequate” after prior year pricing gains, leading to oversubscription, but no breakdown on price discipline. 

India likewise enjoyed an upswing in property cat capacity, at least from existing players.  Reinsurer discipline held and pricing was said to end flat to slightly down, with wordings adjustments following 2023 loss events. 

In the United States, signals from the handful of deals that renew 4.1 also proved positive, with strong kick-on implications for the mid-year cat treaty renewals. Pricing looked “favourable” for cedants and, amid “adequate” capacity, some insurers “took the opportunity to purchase significantly higher limits.” 

“The positive direction taken by the US property catastrophe reinsurance market in January and again at April 1 looks set to continue at mid-year, with ample property catastrophe capacity to meet demand, and signs of greater price competition,” Aon analysts concluded. Early talks are already underway for a “significant” number of US mid-year renewals, analysts said of one strong signal. 

“We anticipate a significant increase in demand for property catastrophe capacity at mid-year renewals, with attractive opportunities for reinsurers to put excess capital to work on well-priced lower layer covers as well as meeting demand for increased limit.”

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