Despite significant reductions in certain individual placements, the reinsurance industry saw a slight uptick in demand in the January renewals, according to Aon’s 2019 market outlook.
Regulatory and rating agency requirements, catastrophe losses resulting from non-peak perils and territories, as well as an ongoing positive buying proposition for insurers were a number of the factors that contributed to this dynamic.
As well as the traditional reinsurance market, multiple emerging or evolving risks have witnessed growth in buying and increased analytics investments, a trend that Aon expects to translate into increased risk transfer
A few of these risks include corporate debt utilisation, urbanisation, coastal migration, privatisation of government infrastructure, infrastructure replacement, government de-risking, cyber, food-borne illness, catastrophic animal disease, longevity and pension shortfall, big data, sharing economy, drones, and robotics.
With respect to U.S flood, Aon says the global reinsurance community demonstrated continued appetite for supporting the exposure via the recently-completed transactions for the Federal Emergency Management Agency (FEMA), including the first cat bond covering U.S flood risk.
In addition, Aon says reinsurers displayed patience and willingness towards taking a long-term view of the opportunity to reinsure U.S flood risk.
Immediately after hurricane Harvey, which resulted in a $1 billion loss to the NFIP reinsurance program, FEMA successfully placed the 2018 traditional reinsurance program, including an alignment with an additional $400 million in capacity.
Furthermore, FEMA recently completed the 2019 traditional placement at comparable terms, similar capacity, and with a consistent reinsurer panel to the 2018 placement, further illustrating a stable market for flood exposure.
Aon says these successful NFIP placements serve to benefit private flood carriers both directly and indirectly. Reinsurers and ILS investors currently have limited options to deploy flood capacity, with many of such capacity sources seeking diversification by way of supporting other flood opportunities.
