Aon: Midyear renewals 'broadly competitive' as property cat demand rises 10%

By Chris Munro

June 29 - (The Insurer) - The midyear reinsurance renewals concluded amid what Aon described as “a broadly competitive environment” with new capacity entering the market, which helped absorb a near 10% increase in global demand for property catastrophe limit.

In its newly published Reinsurance Market Dynamics; Midyear 2025 Renewal report, Aon said “capacity was more than sufficient” during the key June 1 and July 1 renewals in the U.S., Latin America, Australia and New Zealand.

That was because reinsurers, ILS players and new entrants sought to deploy more capacity to grow their market share.

Loss-free property catastrophe placements in the U.S., Australia and New Zealand benefited from pricing improvements, Aon said, and achieved low double-digit risk-adjusted rate reductions on average.

In contrast, loss-affected accounts faced pricing that was flat to increasing at renewal, the broker detailed.

Discussing Floridian insurers and non-loss affected regional carriers in the U.S., Aon said these “experienced broadly positive renewals after several years of challenging conditions”.

“Underlying rating actions and portfolio management, along with legislative reform in Florida, have restored reinsurer confidence,” Aon said.

The picture was different in Latin America and the Caribbean, where Aon said clients secured “moderate reductions.”

“Pricing is now coming off its peak,” Aon said.

Another trend seen during the recent midyear renewals and spurred by the increased supply of capacity was that reinsurers were more flexible about terms and conditions, along with greater pricing competition in all regions.

“The midyear renewal was notable for a further shift in the market’s appetite, with reinsurers more willing to provide protection lower down on programs,” said Aon.

“Products that were not widely available at previous recent renewals were up for discussion including aggregate covers,” the broker noted.

US INSURERS DRIVE NEW CAPACITY DEMAND

The continued growth in reinsurance capacity demand was driven largely by U.S. insurers and influenced by the “significant depopulation” of Florida’s windstorm insurer of last resort, Citizens, Aon said.

“Other factors included inflation, model changes and revised views of natural catastrophe exposure, with recent wildfires in the U.S. and floods in Brazil prompting insurers to evaluate loss potential and protection needs,” the broker noted.

STABLE CASUALTY CAPACITY

Away from the property market, Aon said casualty insurers entered the midyear 2025 renewals in a relatively strong position because robust underlying rating and underwriting actions they have taken in recent years have meant continued reinsurer support.

“While some reinsurers have pulled back from parts of the U.S. casualty market, others are stepping up, resulting in stable capacity overall,” Aon said.

Reinsurers, Aon said, remain watchful of developments regarding nuclear verdicts, as well as adverse development and any emerging risks. However, at the same time, Aon said reinsurers also recognize the upside of relatively high interest rates, strong underlying casualty pricing and the prospect of tort reform.

“Reinsurers continue to be attracted to international placements with limited severity loss and good geographic diversification,” Aon said.

“However, accounts with U.S. exposures that experienced further deterioration in U.S. loss severity saw a significant reduction in reinsurer appetite and increased pricing,” it added.

REINSURANCE CONDITIONS TO REMAIN FAVORABLE

Looking ahead, Aon forecast reinsurance market conditions will likely remain favorable for the foreseeable future.

“While the reinsurance industry has shown its capacity to absorb $50 billion plus loss event(s), increased retentions continue to push the majority of natural catastrophe losses to insurers over the last two years,” it said.

Conditions present opportunities for insurers to address specific issues or adjust their program structures and their coverage to reduce the volatility in both their property and casualty portfolios, the broker added.