Demand for property cat limit to rise by $7.5 billion at mid-year renewals: Aon

By Scott Vincent

April 1 - (The Insurer) - Demand for U.S. property catastrophe limit is expected to increase by more than $7.5 billion at the mid-year renewals, Aon has forecast, with a number of insurers having already taken advantage of early signings to secure capacity at favourable terms.

With several large insurers with U.S. wind exposure having secured "healthy rate reductions" at April 1, Aon said in its latest quarterly renewals report that January's California wildfire losses had not led to a market-wide change in reinsurer appetite or pricing.

Florida is expected to be the main driver of the increased demand, with Aon forecasting that insurers in the state will seek between $4 billion and $5 billion in additional limit at mid-year.

Drivers include the expected increase in the Florida Hurricane Catastrophe Fund attachment by around $1.4 billion, which Aon said will also increase demand for limit below the cat fund. In addition, the broker said updates to vendor catastrophe models will support increased reinsurance demand for some mid-year renewals.

Aon said supply was expected to meet this increasing demand, with pricing remaining healthy for reinsurers at current levels and the Florida market now much more attractive following legislative reforms and underwriting actions of recent years.

This has been reflected in an improvement in the sector's performance. Aon's Florida insurance carrier composite, which comprises around 52 companies, generated overall net income of $402 million for the first nine months of 2024. Overall statutory surplus levels have risen almost 30% since year-end 2022, the broker said.

While hurricanes Helene and Milton eroded profits in the second half of 2024, Aon said the renewed strength of the Florida property market meant these were underwriting margin rather than capital events for the sector.

Aon said its latest estimate suggested January's Los Angeles wildfires will cost the insurance industry between $32 billion and $38 billion.

"The wildfires brought significant ceded losses to the reinsurance market, although the impact on individual reinsurers will vary, and may affect how they come to the market at mid-year in terms of capacity and pricing," the broker said.

"Opportunity exists to pursue off-cycle additional protection from reinsurers looking to deploy capital not taken up during January renewals. In addition, reinsurers will be keen to write premium to earn back losses accrued in the first quarter."