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A disciplined renewals despite market challenges, says Aon

10th January 2020 - Author: Luke Gallin

Global insurance and reinsurance broker Aon has said that in spite of new market dynamics, programs renewed in an orderly fashion at the January 2020 reinsurance renewals season.

Reinsurance renewalsAon’s January 2020 Reinsurance Market Outlook report highlights an orderly renewals season in most regions, adding that this occurred despite the impacts of further client differentiation in underwriting approaches, challenges in the retrocessional market heading into 1/1, and continued evolution of loss dynamics from numerous business lines.

On certain placements, Aon says that reinsurer participations were rebalanced, but regardless, overall capacity levels remained more than adequate for most lines and geographies to secure the protection needed.

Secondary perils losses, which have been increasing in recent times in part as a result of the changing climate, drove new questions during the renewals period, as did climate change more broadly, regulatory and legislative impacts and also reserves, social inflation, and the evolving casualty landscape.

“These broader market challenges coupled with individual portfolio dynamics and reinsurance results, led to reinsurers taking higher stake positions (both in decreasing and increasing lines) on many placements,” says Aon.

The re/insurer broker has also provided an update on reinsurance capital during the first nine months of 2019, noting an increase of 7% to USD 625 billion from the USD 585 billion recorded at the end of 2018, which offsets the 3% retraction witnessed last year. The increase was driven by traditional reinsurance capital which grew 9% in the period to USD 532 billion.

At the same time, alternative reinsurance capital fell by USD 4 billion to USD 93 billion, largely as a result of a reduction in collateralised reinsurance as cat bonds, sidecar vehicles, and ILWs were mostly in line with 2018, says Aon.

One plus for both insurers and reinsurers is that the catastrophe loss activity in 2019 declined significantly when compared with the levels seen in 2017 and 2018, reaching USD 62 billion, which is also down on the ten-year average of USD 81 billion, according to Aon.

So far, reinsurance renewals commentary has pointed to an orderly market at 1/1, but one that remains highly capitalised and competitive as the sector moves through the 2020 renewals.

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