US property cat demand to rise ~$7.5bn at mid-year renewals, Florida taking up to $5bn: Aon
Aon’s Reinsurance Solutions division forecasts increased demand for property catastrophe reinsurance protection in the United States at the key mid-year renewal season, with additional limit of as much as $7.5 billion expected to be sought out by cedants, much of which will be for risks in Florida.
However, the broker also expects the mid-year renewals will see “pent-up supply still outstripping demand”, from the very-well capitalised reinsurance and insurance-linked securities (ILS) markets.
Commenting on the April 1st renewals just completed Aon said, “A competitive reinsurance market resulted in improved pricing for most insurers at April 1 renewals, driven by enhanced reinsurer results and relatively benign natural catastrophe loss activity across the region.”
Adding that, “These buyer-friendly conditions are expected to continue through the mid-year reinsurance renewals, supported by robust levels of capacity and reinsurer appetite.”
Global reinsurance capital reached a record high of $715 billion in 2024, Aon said, helped by expansion of the catastrophe bond market and alternative capital rising to a new high of $115 billion.
George Attard, CEO APAC for Reinsurance Solutions at Aon, commented, “At April 1 our clients continued to benefit from favorable reinsurance market and pricing conditions, supported by Aon’s extensive advocacy, analytical and transactional expertise.
“We expect to see opportunities for insurers to explore frequency protections and top-up covers as we approach the mid-year renewals, especially for those insurers that concentrate on the key characteristics of high performance.”
Attard added, “Across the board, facultative capacity has increased and reinsurers are competing more aggressively, creating greater opportunities for insurers to use facultative reinsurance to support growth plans and manage volatility.’
Attard further commented on the outlook for the mid-year reinsurance renewals at June and July, when much of the US business and a particular Florida focus, as well as treaties in Australia and New Zealand are always key features of the negotiations.
“Heading into the mid-year renewals, we expect over $7.5 billion of additional U.S. property catastrophe limit demand, mostly due to a healthier Florida market and the depopulation of the state windstorm insurer Citizens,” Attard explained.
Further stating that, “We also anticipate some additional reinsurance purchasing from U.S. national carriers looking to mitigate further major net losses during 2025.”
Aon’s Reinsurance Solutions said that it expects demand for property cat reinsurance limit in Florida to rise by between $4 billion and as much as $5 billion at the June 2025 renewals.
An expected increase in the Florida Hurricane Catastrophe Fund (FHCF) attachment (by around $1.4 billion), is anticipated to drive additional buying below the FHCF, while some vendor model changes will also support increased demand for reinsurance and so will Citizens depopulation as more risk moves to private insurers.
Aon notes that reinsurance capital continues to grow and is expected to keep up with demand, so no shortage of capacity is expected for the mid-year renewal season.
However, the company also explained that after the significant California wildfire losses earlier this year, with as much as between $11 billion and $17 billion being ceded, “These losses have absorbed 25 percent to 33 percent of major reinsurers’ annual catastrophe allowances which may affect how some come to the market at mid-year.”
The reinsurance broker added that, on the client side, “For insurers, current market dynamics are creating opportunities to explore frequency protections and top-up covers in an increasingly favorable pricing environment. Some clients are taking advantage of favorable market conditions and securing capacity at attractive rates ahead of mid-year renewals.”
Which is a trend seen in the catastrophe bond market, with more US limit placed in the first-quarter of the year and a number of sponsors coming to market earlier than typical.
Early signings are likely to remain a feature in the run-up to the June and July reinsurance renewal season, on which Aon said, “Opportunity exists to pursue off-cycle additional protection from reinsurers looking to deploy capital not taken up during January renewals. In addition, reinsurers will be keen to write premium to earn back losses accrued in the first quarter.”
Given the additional limit set to be demanded for reinsurance renewals at the mid-year, this presents opportunities for the insurance-linked securities (ILS) market.
Catastrophe bonds can be expected to absorb a proportion of this, as too while private ILS strategies focused on collateralized reinsurance.
With Florida in focus for the highest increase in property cat limit demand in 2025, that being ground-zero for the deployment of ILS capacity it is to be expected the market takes its share.
However, it’s always worth remembering that an incremental $7.5 billion of limit being required will not equal that sum in additional capital being deployed, given the leverage of the rate balance-sheet and levered ILS strategies.
Read all of our reinsurance renewals news and analysis.
