Andy Marcell, the Chief Executive Officer (CEO) of Aon’s Reinsurance Solutions, has stressed that clients will be looking for stability and closer relationships with reinsurers heading into the 2024 renewals, following tough renewals throughout 2023.
Insurance and reinsurance broker Aon held its Renewal Season Briefing this afternoon, during which Marcell commented on what the market can expect heading into the key January 1st, 2024 reinsurance renewals.
“I think that the clients are looking for stability, closer reinsurance relationships as we walk into 2024, and to sort of rebuild a stable relationship, in terms of capital management with their reinsurance partners.
“And that is something that they are uniquely focused on and of course, they’re very, very interested to see how the reinsurers will react to the renewal coming up at the 1st of January,” said Marcell.
For Aon’s Reinsurance Solutions division, roughly 45% of its global catastrophe placements are done at the 1/1 renewals, which is a key period for much of the marketplace.
Throughout 2023, reinsurers have tightened terms and moved away from lower layers of programmes in an effort to lower volatility on the back of rising losses from so-called secondary perils, such as floods, wildfires, and convective storms.
Catastrophe activity in the first half of 2023 was dominated by severe convective storms, and it’s likely that reinsurers will look to be disciplined in order to sustain more positive results and pricing in the hard market environment.
Of course, for primary insurers, this means more losses as retentions have risen for these types of risks, while reinsurance rates have also risen for main perils such as hurricanes after recent loss activity.
“So, we expect, and we’ll be pushing for reduction in rates in most places where we see competition, we see there’s more than adequate pricing adequacy. At the top end of the programmes, like I said, there is a lot of competition for that risk.
“On the other hand, there are places in the world that have had losses and we’ll wait to see how the market reacts to the Turkish quakes, the Italian floods and some of the losses in the Nordics. But in the main, a lot of the volatility and the losses that have occurred have been at the lower end of programmes where the global insurers, for example, have managed that in their own ways,” said Marcell.
“We expect to see some private placements to help manage that volatility. However, I would point out that in the global insurance market there are many types of different insurance companies, regionals and mutual’s and nationals and the amount of volatility that is now sitting on their balance sheets is at a place that is challenging for them, right.
“So, they will be looking to find ways to get more frequency covered to the extent possible at affordable prices, and I expect that to be an ongoing discussion through 2024,” he added.
In its report, Aon says that it expects a more orderly and predictable renewals at Jan 1st 2024 than seen at the start of this year. That might well be the case, but there’s also some time left in the Atlantic hurricane season and if another Ian or similar heads for Florida and makes landfall in the wrong place, there’s every chance reinsurers will look to push rates even higher.
