The Jan. 1, 2025, reinsurance renewals reflected continued consolidation of favorable trends from 2024, according to Aon’s latest analysis.
Amid geopolitical uncertainty and a turbulent hurricane season, capacity remained sufficient across most lines and regions. This availability led to improved pricing and terms for many reinsurance placements. Reinsurers showed increased appetite for high-margin lines and regions, seeking better signings across diverse client portfolios.
Hurricanes Milton and Helene were notable events in 2024 but did not significantly reduce reinsurer interest in property reinsurance during the 1/1 renewals. Ample capacity allowed for risk-adjusted price reductions, with reinsurers offering more flexibility to meet insurers’ specific needs.
Aon reported that some insurers used this environment to purchase additional natural catastrophe protection, including aggregate and subsequent event covers. Insurers retained approximately 90% of natural catastrophe insured losses over the past two years, and demand for frequency protection is expected to rise in early 2025 as insurers aim to reduce portfolio volatility.
Storm Boris caused extensive flooding in Central and Eastern Europe in September 2024, with losses nearing €2 billion. However, advanced meteorological forecasting and improved flood defenses limited the overall impact, ensuring sufficient capacity in the region.
Aon’s insights suggest that similar measures have helped reduce potential damages in prior events, highlighting the importance of preparedness.
Casualty reinsurance conditions remained stable despite adverse litigation trends and loss development in soft market years. Adequate capacity, high interest rates, and a strong underlying rating environment supported the market.
However, renewals involving US-exposed international liability and regional US insurers faced more challenges. Aon noted that while reinsurers scrutinized areas like forever chemicals, they worked with brokers to avoid blanket exclusions.
The global reinsurance industry entered 2025 in a strong financial position. Aon reported that global reinsurer capital reached US$715 billion as of Sept. 30, 2024, reflecting a US$45 billion increase since the end of 2023. This growth was primarily driven by retained earnings.
Insured losses from natural catastrophes in 2024 exceeded US$140 billion, yet reinsurers are on track to post favorable year-end results. A composite of 25 global reinsurers tracked by Aon showed an average combined ratio of 91.4% and an annualized return on equity of 16.2% through the first nine months of 2024.
Alternative capital also reached record levels, with US$17 billion in catastrophe bonds issued during 2024. This activity brought the outstanding catastrophe bond market to US$47 billion, marking an 11% year-over-year increase and a 34% rise since January 2023. Aon attributed this growth to investors achieving meaningful returns over the past two years.
Looking ahead, reinsurance demand is expected to remain robust in 2025, albeit with slower growth compared to 2024 due to moderated inflation. Aon’s Capital Poll revealed that most US insurers anticipate growth rates above 5%, with 25% expecting growth of 11% or higher.
Despite this optimism, 22% of personal insurers reported potential capital constraints, increasing interest in structured reinsurance solutions, such as quota share reinsurance, loss portfolio transfers, and adverse development covers. Additionally, 29% of surveyed insurers viewed current catastrophe retention levels as high relative to expected earnings.
Aon emphasized the need to address the widening protection gap caused by extreme weather events, litigation trends, and increasingly complex risks. Captive premiums have risen as corporations retain more risk, while public sector calls for intervention in areas like natural catastrophe and cyber risks are growing.
For example, the European Insurance and Occupational Pensions Authority (EIOPA) and the European Central Bank recently proposed an EU public-private reinsurance scheme to address these challenges.
Aon noted that it has taken steps to bridge these gaps. Recent partnerships include a disaster risk financing initiative with the United Nations Capital Development Fund and Lloyd’s for Pacific Island states. The company also collaborated with Fathom to enhance its Climate Risk Monitor tool, aiding insurers in assessing climate change impacts on flood risks.
In Ukraine, Aon worked with the US Development Finance Corporation and the European Bank for Reconstruction and Development to create war risk insurance facilities, supporting the country’s economic recovery.
The reinsurance market in 2025 is poised to remain attractive for both buyers and sellers. Insurers are expected to look to their reinsurance partners for greater support in managing volatility losses.
The success of reinsurers will depend on their ability to meet client needs across diverse portfolios while adapting to evolving risks and opportunities.
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