Stability is key for 1/1 renewal deals, say Aon’s US reinsurance leaders

The ongoing evolution of reinsurance capacity, pricing trends and underwriting discipline have taken centre-stage as key focuses for APCIA this year. For the January 1 renewals, cedants are primarily concerned with achieving stable and predictable pricing after a few years of volatility.

There’s a growing focus on building long-term partnerships to mitigate exposure to market swings.

On the property side, recent underwriting and rate actions have improved profitability, which has increased reinsurers’ appetite for supporting property business—especially for cedants that differentiate themselves through strong risk management and favourable performance.

US market dynamics and global alignment

In the US, the market is witnessing varying conditions across lines, regions and sectors, according to Steve Hofmann.

Social inflation remains a significant issue in the casualty business. Companies mitigating its impact by carefully managing line sizes and adjusting attachment points to better control exposure will be differentiated in the market.

Additionally, the approach claims teams take in managing cases and settlements will play a significant role in addressing these pressures, making it a key area of focus in upcoming discussions.

Strong claims-handling strategies, including proactive settlement practices and a focus on controlling litigation costs, will be essential in navigating the challenges posed by social inflation.

“The property market is showing more favourable conditions for cedants.”

As the industry knows well, nuclear verdicts have led to exponential growth in related insurance costs, harming US business competitiveness and consumers.

As a result, Aon has decided not to accept engagements to serve as a broker for litigation insurance transactions insuring US litigation finance businesses.

We believe that this decision will help contribute to a more sustainable marketplace for all stakeholders.

The property market is showing more favourable conditions for cedants.

The rate actions and underwriting discipline seen over the past several months have improved profitability in property lines, encouraging reinsurers to offer more capacity.

Cedants with strong differentiation in terms of risk management and performance are particularly well-positioned to benefit from this increased appetite.

Severe convective storm risks, which remain a major contributor to catastrophe losses, are top of mind, with reinsurers taking individualised views on this peril based on their own risk models, says Kevin Traetow.

With reinsurers developing their own views of risk on this peril, cedants will need to engage with multiple reinsurers to find the best fit for their risk profile and coverage needs.

“We are helping to shape better decisions and drive new product offerings.”

Additionally, cedants are proactively seeking ways to reduce retained cat loss volatility.

Property aggregate covers and lower-attaching catastrophe towers are becoming increasingly attractive as cedants look to reinsurers for more flexibility and tailored solutions.

Impact of macroeconomic conditions

Macroeconomic factors have a mixed impact on the re/insurance industry. 

While easing inflation and lower interest rates might initially appear beneficial, they present challenges for investment returns, which could pressure underwriting profitability.

That said, lower inflation could stabilise claim costs, particularly in casualty lines, and provide reinsurers with a clearer picture of long-term liabilities.

The potential for sustained low interest rates might drive insurers to rely more on underwriting income, reinforcing the importance of disciplined pricing and risk selection.

Growth opportunities and product innovation

Over the next five years, the most significant growth opportunities may arise from emerging risks such as cyber, climate-related perils, construction, energy and legacy exposures, the executives believe.

As businesses seek more comprehensive coverage for these evolving threats, the demand for innovative products will grow.

Aon is at the forefront of developing tailored solutions to address these new risks, including parametric products and alternative capital solutions, assisting companies to pursue profitable growth opportunities.

By combining data analytics with a deeper understanding of clients’ needs, we are helping to shape better decisions and drive new product offerings that align with both market demand and the evolving risk landscape.

Steve Hofmann is co-president of Aon’s US Reinsurance Solutions. He can be contacted at: stephen.hofmann@aon.com 

Kevin Traetow is co-president of Aon’s US Reinsurance Solutions. He can be contacted at: kevin.traetow@aon.com 

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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