Conditions in the U.S. property catastrophe reinsurance market continued to shift in favour of buyers at the mid-year renewals, yet portfolio returns remain strong and attractive for reinsurers and investors alike, even with the rate reductions, according to Aon.
A new report from the firm has suggested that capacity was abundant, more than sufficient to meet increased demand from insurers, as traditional reinsurers pursued growth and alternative capital intensified competition, particularly in the middle layers of catastrophe programs.
Demand was reportedly strong, with total limits purchased expected to rise by over 10%, driven by insurers reassessing wildfire exposure after the January Los Angeles fires and by additional limits linked to Florida Citizens depopulation.
“Pricing remained the primary area for competition, although reinsurers showed greater flexibility and willingness to consider expanded coverage and changes to program structures,” Aon explained.
Terms and conditions were said to be largely stable, with non-concurrencies from the hard market now mostly resolved. However, coverage for loss-impacted risks came under increased scrutiny.
At the same time, reinsurers were more amenable to offering broader protections, including aggregate and subsequent event covers, especially for loss-free and well-performing portfolios.
Aon observed that outcomes, while generally favourable, varied depending on segment, performance, and loss experience.
Meanwhile, as per the report, pricing of catastrophe risk was notably more differentiated than in past renewals, with reinsurers quoting and supporting firm orders based on individual underwriting results.
As a result of the increased supply and demand, insurers expanded and diversified their reinsurance panels, incorporating new reinsurers and engaging a broader range of counterparties.
While U.S. national and global insurers remained particularly attractive, Floridian and regional insurers also benefited from more competitive pricing.
