A “unique confluence of market uncertainties” is causing reinsurers to reassess their risk appetite ahead of the reinsurance renewal season in January, according to an Aon PLC report released on Thursday.
The report says macroeconomic and geopolitical pressures have coincided with an increased frequency of extreme weather events and insurers’ demand for additional risk transfer capacity, causing a supply-demand mismatch that will continue until January renewals.
While the majority of reinsurers have chosen to maintain existing capacity levels, others have reduced capacity or pulled out of the property catastrophe market, the report said.
Aon said global reinsurance capital fell 11% to $600 billion in the first half of this year, driven mainly by unrealized investment losses.
Catastrophe bonds could hit record volume this year, and alternative capital remains robust, down just 1% to $95 billion in the first half, the report said.
Attracting new capital will be critical to meeting insurers’ reinsurance requirements, Aon said.
“Reinsurers will prioritize cedants that provide detailed exposure data and demonstrate underwriting measures that mitigate areas of uncertainty, particularly around the impact of inflation on total insured values,” Joe Monaghan, global growth leader at Aon’s Reinsurance Solutions, said in a statement.