The Asia-Pacific (APAC) region continues to present insures with diversification and growth opportunities, states George Attard, CEO, Reinsurance Solutions, Asia Pacific, Aon.
Attard explains that the 1/1 renewal marks a “turning point” for the global reinsurance sector, and one that should put the market on a more “sustainable footing going forward.”
“We are optimistic that capacity constraints will ease, and we see opportunities for APAC clients to optimise capital and grow their businesses in a renewed partnership with reinsurers,” he said.
In particular, 1/1 is a memorable renewal for APAC, especially in Greater China, Southeast Asia and South Korea, with renewals in the catastrophe exposed markets of Japan and Australia & New Zealand concentrated on April 1 and July 1.
Attard noted that demand for reinsurance at 1/1 in APAC remained stable, which he said was supported by continued underlying exposure and portfolio growth, rather than inflation.
Attard, added: “While a feature of renewal negotiations, inflation has been relatively contained in Asia, and insurers were able to successfully build this into their narrative. Moderate exposure growth in Asia has yet, however, to translate to significant demand for additional limit.”
However, while capacity faced pressure at 1/1, particularly within China, South Korea and Indonesia, it was available at a price. Attard highlighted how rates in APAC were varied by market as reinsurers “pushed for significant increases”, which was in response to risk and catastrophe loss activity across the region.
Moreover, retention levels also faced pressure on larger programs as reinsurers sought to move away from frequency losses, and as some buyers also looked to mitigate price increases.
Reinsurers also pushed structural changes to proportional reinsurance contracts, which included event limits and expanded loss participation clauses, as well as reduced ceding commissions.
Attard explained how the same pressures that the APAC region observed during the January renewals are likely to play out at key regional renewals in April and mid-year as well.
He added that Aon expects the placement process going forward to be “significantly more orderly” following lessons learnt and now established risk appetite from reinsurance carriers.
“The January renewals have shown that clear messaging and client differentiation resulted in favorable outcomes and that having a partner with strong market relationships and global access to all types of capacity was key to success.”
Additionally, Attard stated that Aon continues to build capacity in APAC by attracting new capital to the market, as well as expanding innovative risk transfer vehicles, and creating global capacity via access to Asian domiciled reinsurers.
“For insurers, capital and reinsurance optimisation is more important than ever. However, clients have a number of levers at their disposal, including integrated placements across property and casualty, legacy and structured reinsurance solutions, strategic consulting and data analytics.”
Analysts at Aon recently said that the aviation market experienced its most challenging renewal in over two decades at 1/1, with significant rate increases and coverage restrictions.
According to Aon’s January Reinsurance Market Dynamics report, the outlook for agriculture business looks very promising for 2023, with growth opportunities for reinsurers.