1.1 reinsurance renewals cleared as cedents bent to capacity: Aon

Primary insurers stepped forward to grease the ultimate conclusion of 1.1 renewals in property, hiking retentions and slashing demand for additional limit to overcome capacity shortfalls,  Aon said in its summary of the 1.1 renewals.

January 1, 2023 renewals proved “the most challenging segment” of the “most challenging January 1 renewal in a generation,” Aon said of the event.

“Insurers adapted to market conditions with retention increases and consideration of top end limit, easing some pressure on capacity,” authors wrote. That helped the industry clear the bar “with little or no surplus capacity available for additional limit.”

Aon offered no estimates for price moves across property lines, save to say that risk-adjusted rate-on-line “increased substantially in both North America and Europe, with US property catastrophe prices now exceeding 2007 highs.”

Retention levels broadly increased, frequently “to levels at or above cumulative inflation over the last decade and above recent years’ secondary loss history.”

Increases in limit, a feared demand-side driver going into renewals, ultimately fizzled in the face of reinsurer absence.

“Bound limit was effectively flat for peak zone U.S. risk at January 1, 2023 and less than 10 percent up in non-peak regions that are favourable for reinsurer diversification, as clients adapted their reinsurance purchasing to market conditions,” authors claimed.

That could leave the market with lingering demand in search of private and facultative solutions throughout Q1, Aon believes.

“Some insurers will consider buying additional limit for second and subsequent events or top layer protection, should market conditions allow throughout 2023,” they wrote. Many clients will "re-evaluate their retained volatility” in Q1 and proceed to some form of shopping.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.