APAC (Asia-Pacific) renewals are proceeding in an orderly fashion as the reinsurance market finds itself on a more sustainable footing following a turbulent 1/1, suggests Aon Reinsurance Solutions APAC CEO, George Attard.
Attard states that April 1 is a significant renewal for the Asia Pacific region, which is an important catastrophe market, and home to some of the world’s largest reinsurance placements.
He explains that historically, APAC has been somewhat immune to the fluctuations of the reinsurance market cycle, adding that while the demand-supply dynamics seen at the January 1 renewals have played out in April, the effect has been more moderate.
“Broadly speaking, pricing for natural catastrophe covers in APAC is set to increase markedly at April 1, with retention levels also increasing,” Attard said.
He continued, “However, local factors have helped mitigate the effects of the hard reinsurance market. Demand is relatively flat, in part due to lower inflation rates in Asia, particularly in Japan, while supply has been relatively stable.
“After the dust settled on January 1, reinsurers re-established their risk appetite for natural catastrophe exposures, and while there are no new entrants to the market, many established players have since increased their participation in the APAC region, reassured by improved pricing and conditions.”
Attard notes that this, coupled with insurers’ willingness to increase retentions, has put the market on course for a pragmatic outcome to the renewal.
Further, Japan, which sees the vast majority of catastrophe reinsurance renew at April 1, benefited from price corrections in prior years, with rate increases for earthquake and windstorm at April 1 notably lower than those seen in the US and Europe at January 1.
Attard concluded, “As we close off the April renewals, all eyes will now turn to mid-year property catastrophe renewals in APAC, in particular Australia and New Zealand, which have both experienced unusually large catastrophe events.
“Although likely to be challenging with continued pressure on pricing and retention levels, an orderly mid-year renewal is anticipated for the APAC region given pricing changes implemented in 2022 and evolving supply-demand dynamics.”