Continued Growth in Reinsurance Capital
As the reinsurance sector experiences robust capital growth, it aligns with the rising demand from buyers. Aon’s Reinsurance Solutions predicts an increase exceeding $7.5 billion in additional US property catastrophe limit during the mid-year renewals. These June and July renewals are crucial for the US property catastrophe market. Despite a challenging first quarter marked by severe California wildfires, the patterns observed in January and April renewals are expected to persist, bolstered by ample reinsurance capacity and the strong appetite of reinsurers.
Reinsurance Market Dynamics and Capacity
According to Aon’s April 2025 market dynamics report, there’s sufficient capacity as we approach the mid-year renewal season. Reinsurance capital surged to a record $715 billion in 2024, driven by strong retained earnings in traditional markets and a record year for catastrophe bond issuance, which elevated alternative capital to $115 billion.
Insights from re/insurance brokers on the April 2025 Japan-focused renewals indicate a higher selling appetite and generally more favorable pricing and conditions for buyers compared to the previous year. George Attard, CEO, Asia Pacific, Reinsurance Solutions at Aon, remarked, “April renewals in Asia Pacific continued the favorable market trends from January 1. With relatively mild natural catastrophe losses in Asia, reinsurers extended additional capacity on April 1. Consequently, insurers benefited from significant reductions, especially in Japan and South Korea, where risk-adjusted property catastrophe rates saw double-digit decreases.”
Mid-Year Renewal Projections
The trend is expected to continue into the mid-year renewals, although the impact of the California wildfires on rates remains uncertain. California wildfire reinsurance pricing is likely to rise due to industry loss estimates ranging from $35 billion to $50 billion. However, it is yet to be determined if these wildfires will cause hardening in other sections of the US property and property catastrophe market, or if the event will limit potential softening observed earlier in the year.
Reinsurers achieved strong 2024 results after robust earnings in 2023. With supply still exceeding demand, the mid-year renewals represent a critical opportunity for reinsurers to achieve 2025 growth objectives and generate premiums to offset first-quarter losses. Attard explains, “For insurers, current market dynamics present opportunities to explore frequency protections and top-up covers in an increasingly favorable pricing environment. Some clients are leveraging these favorable conditions to secure capacity at attractive rates ahead of the mid-year renewals.”
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