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A “unique confluence of market uncertainties” is causing reinsurers to reassess their risk appetites leading up to the January reinsurance renewal season, according to an Aon PLC report released Thursday.
The report said 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 through January renewals.
While the majority of reinsurers have opted to maintain existing capacity levels, others have reduced capacity or withdrawn from the property catastrophe market, the report said.
Aon said global reinsurance capital declined 11% to $600 billion in the first half of this year, driven mainly by unrealized investment losses.
Catastrophe bonds could reach record volume this year and alternative capital remains robust, declining by just 1% to $95 billion during the first half, according to the report.
Attracting new capital will be essential to meeting insurers’ reinsurance requirements, Aon said.
“Reinsurers will prioritize cedents that provide detailed exposure data and demonstrate underwriting actions that mitigate areas of uncertainty, especially around the impact of inflation on total insured values,” Joe Monaghan, global growth leader at Aon’s Reinsurance Solutions, said in a statement.