A closer look at the renewal landscape and its impacts

Global Reinsurance Trends


While a number of regions / clients experienced loss in recent years and will see pricing move commensurate with those results, overall, the reinsurance market continued to have orderly renewals since the start of 2021. The primary theme of most renewals centered around contract terms, particularly for those that renewed prior to the height of the COVID-related contract negotiations in 2020. New capital coming into the market over the last year has helped to stem further dislocation, and reinsurers continue to evaluate new areas for growth, creating a strong offering for insurers.

Q1 Insurer Losses by Year by Type

Source: Aon Reinsurance Solutions

Catastrophe Losses: Q1 Loss Driven By US Winter

  • Insurers faced nearly USD21 billion in natural disaster losses; the highest Q1 total since 2011, 25% above the recent 10-year average (2011-2020) of USD16 billion, and 73% higher than the median of USD11 billion.

  • More than 80% of the insured losses were sustained in the United States. The February Winter Storm insured loss estimates suggest a total of at least USD12 billion, most of which was attributed to impacts in the state of Texas. February 2021 marked the 19th coldest February on record in the contiguous U.S. dating to 1895, and the coldest since 1989.

  • APAC incurred more than USD2 billion in insured losses. Much of the current total was attributed an offshore magnitude-7.3 earthquake on February 13. Per the General Insurance Association of Japan (GIAJ), more than 200,000 claims have been filed, with an expected insured loss tally to eventually exceed USD1 billion. Elsewhere in Asia-Pacific, a significant “East Coast Low” prompted major flooding across parts of New South Wales and Queensland in late March. Initial guidance from the Insurance Council of Australia (ICA) cited the value of filed claims reaching nearing AUD600 million (USD465 million).

  • Europe recorded more than USD1 billion in industry losses. The continent endured an active windstorm season, though no event resulted in more than USD300 million in payouts. The closest was late January’s Windstorm Christoph (USD275 million).

Global Reinsurer Capital: Up Despite a Tough 2020

  • The reinsurance market is still well capitalized but is taking some loss from a secondary peril (Winter Storm). Aon estimates that global reinsurer capital had increased to a new high of USD650 billion by the end of 2020 (up 4%), driven by continued capital market recovery, new equity issuance and US dollar depreciation.

  • Retained earnings in the reinsurance sector were generally weak in 2020, driven by the impact of COVID-19 on both sides of the balance sheet, coupled with continued high frequency of natural catastrophe activity. However, traditional equity capital had already recovered to pre-pandemic levels by the end of September.

  • Year-on-year increase of 4% was heavily influenced by depreciation of the US dollar in the fourth quarter, particularly against the Euro (the reporting currency of several large reinsurers). At constant exchange rates, underlying growth was closer to 1%, driven by unrealized gains on bonds (relating to reductions in interest rates), a decline in the amount of capital returned to investors (due to the uncertainty caused by the pandemic) and around USD15 billion of new equity issuance.

Global Reinsurer Capital

Sources: Company financial statements, Aon Business Intelligence, Aon Securities Inc.