The April reinsurance renewals saw a competitive, buyer-friendly market with plentiful capacity and price reductions for loss-free accounts – in a continuation of the favorable market conditions seen in January, according to reports published by Aon and Gallagher Re.
“The positive renewal bodes well for upcoming mid-year renewals, when we expect buyer-friendly conditions will prevail, supported by robust levels of capacity and reinsurer appetite,” said Aon in its report titled “Reinsurance Market Dynamics – April 2025 Renewal.”
“A competitive reinsurance market resulted in much improved pricing for most insurers at 4/1, a key renewal period for Japan, South Korea and India,” which Aon said was driven by enhanced reinsurer results and a relatively benign natural catastrophe loss activity across Asia.
Indeed, insurers with loss-free property catastrophe accounts in Japan and South Korea were able to get double-digit price reductions, said Aon. “Previously challenged areas, such as per-risk covers, also enjoyed more favorable pricing, as insurers leveraged property catastrophe business and reinsurer growth ambitions to garner more holistic support.”
Abundant reinsurance capacity in most lines helped buyers achieve better renewal outcomes with risk-adjusted price reductions as well as coverage and structural improvements, said Gallagher Re in its report titled “1st View – Finding the Path.”
“However, most reinsurers are still comfortable with levels of rate adequacy in nearly all lines of business, following the significant re-pricing of risk in the reinsurance market [which has occurred over the past few years],” Gallagher Re continued.
Favorable Conditions Likely to Continue
Despite an active first quarter for natural catastrophe claims, Aon expects that the favorable conditions seen at January and April renewals will continue at mid-year, supported by abundant reinsurance capacity and reinsurer appetite for more business. (June and July are key renewal dates for insurers in the U.S., Australia and New Zealand.)
“Assuming no major unexpected events during the remainder of 2025, it is likely that the differentiated approach to risk-adjusted rate reductions being taken by the global reinsurance market will not only continue but accelerate,” confirmed Gallagher Re.
“Reinsurers will try to ensure that variations between accounts with profitable results and reasonable pricing margins, and loss-making accounts with perceived insufficient margins, are maintained,” Gallagher said. “The challenge for reinsurers will be balancing the desire to deploy increasing capital levels in an attractive market with the pressure to support less differentiated, blanket rate reductions.”
“[T]he reinsurance market is highly capitalized and competitive ahead of [the] midyear renewals. With pent-up supply still outstripping demand, the mid-year represents the last major renewal opportunity for reinsurers to meet 2025 growth targets and earn premium to offset losses in the first quarter,” said Aon.
The Aon report noted that these market dynamics will create opportunities for reinsurance buyers “to explore frequency protections and top-up covers in an increasingly favorable pricing environment.” (Reinsurers pulled back significantly from loss-making frequency layers, driven by so-called secondary perils, such as floods and severe convective storms, during the January 2023 renewals.)
Record Reinsurance Capital
The main driver of more buyer-friendly renewals during 2025 is the strong results that reinsurers reported in 2023 and 2024, which has helped increase traditional capital levels to record levels, the brokers agreed.
Moody’s Ratings published a report this week showing that the four largest European reinsurers – Munich Re, Swiss Re, Hannover Re, and SCOR – achieved record combined earnings of €11 billion for 2024, an 8% increase from 2023. These record profits were driven by strong property/casualty underwriting and investment returns, despite higher industry catastrophe claims, Moody’s said.
Gallagher Re estimated that traditional reinsurance capital reached an all-time high of $655 billion, driven by “excellent reinsurer results.” On the other hand, Aon’s estimate for global reinsurer capital was $715 billion in 2024, which was driven by strong retained earnings and an expanding catastrophe bond market.
Strong investor demand in insurance-linked securities (ILS) investments has led alternative capital to reach an all-time peak of $114 billion, said Gallagher Re. (Aon estimated that alternative capital hit nearly $115 billion, which includes approximately $50 billion in catastrophe bonds).
Overall, market capital (which includes traditional and alternative capital) has increased by 5.3% to $769 billion as of Dec. 31, 2024, according to Gallagher Re.
Los Angeles Wildfires
Gallagher Re said the impact of California’s wildfire losses is substantial but manageable – with the latest estimates near $40 billion gross. While claims currently sit within reinsurers’ 2025 natural catastrophe budgets, there is market sensitivity around the degree to which the losses “have eroded remaining catastrophe budgets so early in the year – with traditionally higher cat loss quarters still to come,” the Gallagher report added.
“The Los Angeles wildfires in January, which are expected to cost the industry between $32 billion and $38 billion, had little to no impact on capacity, pricing and terms for Asia Pacific renewals,” Aon confirmed.
Ceded losses from the Los Angeles wildfires are an estimated $11 billion-$17 billion, which Aon said are “significant” for reinsurers but will have varying impact. “These losses have absorbed 25% to 33% of major reinsurers’ annual catastrophe allowances which may affect how some come to the market at mid-year,” the broker said.
“For the relatively small and diverse group of U.S. regional and national insurers renewing at 4/1, the Los Angeles wildfires had a mixed results based on wildfire exposure and loss experience,” Aon continued. “That said, U.S. insurers with loss-free risks saw rate reductions in line with 1/1, while loss-impacted accounts experienced an orderly and stable renewal.”
Despite the wildfires, Aon noted that reinsurers continued to trade and deploy capacity uninterrupted, continuing to support insurers with significant wildfire exposure. “Some reinsurers stepped up to offer additional wildfire capacity and were rewarded with larger signings.”
Gallagher Re aid the mid-year renewals, which have wider geographic footprints, “will provide better insight on the market impact” of the Los Angeles wildfires. “What is clear is that these losses will fall asymmetrically, with a much higher concentration of loss on a limited number of primary carriers.”
Photograph: The Palisades Fire ravages a neighborhood amid high winds in the Pacific Palisades neighborhood of Los Angeles, Jan. 7, 2025. (AP Photo/Ethan Swope)
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