The global reinsurance market has become more competitive in 6M 2024
Insurers saw positive results from mid-year renewals of reinsurance contracts, which included lower reinsurance rates for property catastrophe risk and improved terms and reinsurance coverage, according to Aon Reinsurance Market Dynamics’ July 2024 reinsurance market dynamics report.
Although the reinsurance market has become more competitive, the situation remains dynamic due to the volatility of secondary property losses, increased forecasts of the Atlantic hurricane season, social inflation and adverse development of casualty reserves.
In contrast to 2023, mid-year reinsurance capacity for US catastrophe businesses was more than adequate to meet increased demand, with US insurers purchasing more than $10 billion in additional catastrophe limit.
Rollovers on June 1 and July 1 continued to build on positive momentum on January 1 and April 1, with increased appetite from the traditional reinsurance and ILS markets putting pressure on reinsurance rates for both US and Florida specialty insurers, with the latter experiencing rate cuts for the first time in three years
Dynamics of the global reinsurance sector, 2008-2024
Meanwhile, contract renewals in Latin America and the Caribbean were also positive for insurers, with sufficient capacity to meet demand and risk-adjusted fixed, before single-digit increases in reinsurance prices. Insurers in Australia and New Zealand also experienced stable market conditions, with around 80% of their property catastrophe reinsurance business renewed mid-year.
The report shows that reinsurers’ total capital reached a new record of $695 billion by the end of the first quarter of 2024, up from $670 billion at the end of 2023.
The capital increase was driven by retained earnings, asset value recovery and new inflows into the distressed bond market.
Issue of property disaster bonds
Aon Securities estimates total ILS capital rose to an all-time high of $110 billion during the second quarter, up from $108 billion at the end of 2023, with a record $46 billion cap on catastrophe bonds.
For the first time, more than $8 billion in distressed bonds were issued in one quarter.
Reinsurers generate solid returns by historical standards, with annualized returns on capital averaging around 20% in the first quarter of the year.