Aon report expects strong reinsurance demand in 2025
Aon has announced that it expects reinsurance demand to remain strong in 2025, albeit at a lower growth than 2024 as inflation has moderated. Primary market trends are expected to fuel demand increases for targeted reinsurance protection, the company said in its reinsurance dynamics report for January 2025.
According to Aon’s latest Capital Poll, most US insurers expect to exceed a growth rate of 5 percent in 2025, with a quarter expecting growth of 11 percent or higher in 2025. Sixty-six percent believe they have sufficient or excess capital, yet more personal insurers versus commercial insurers are capital constrained; 22 percent say they may need to slow growth to manage capital. As a result, survey respondents expressed an increased interest in structured reinsurance, such as structured quota share reinsurance.
Aon added that loss portfolio transfer and adverse development reinsurance covers could also help ease earnings volatility for casualty insurers as social inflation continues to impact results. In addition, 29 percent of US insurers view current catastrophe retention levels as “high” relative to expected earnings.
The Aon report pointed out that in addition to addressing insurers immediate protection needs, the re/insurance industry must not lose sight of the bigger picture. The protection gap continues to widen across a range of exposures, with increasing frequency and severity of extreme weather events, adverse litigation trends, emerging technologies and increasingly large, complex and interconnected commercial risks.
“Warning signals are flashing,” the Aon report also warned. “Captive premiums have jumped as corporates retain more risk, while voices calling for public sector intervention in natural catastrophe and cyber risks are getting louder. In December, the European Insurance and Occupational Pensions Authority (EIOPA) and the European Central Bank released a joint paper proposing an EU public-private reinsurance scheme; EIOPA says the proposal is a response to the growing frequency and severity of natural catastrophes and to address the future affordability of insurance. From US homeowners struggling to insure their properties against wildfires, storms and floods, to public entities unable to buy law enforcement liability cover, or corporates facing reduced limits for US casualty, the challenge for our industry is adequately pricing the risk to attract capital as the pool of insurable risks grow.
“Yet, today’s evolving landscape presents the industry with a huge opportunity to increase our relevance and to grow. Billions, if not trillions, will be invested in transition, climate adaptation and new technologies like artificial intelligence in coming years. Insurers are keen to develop solutions and play their historical role as enablers of innovation, investment and economic development. But insurers will not be able to do so without the support and expertise of reinsurers.”
To read the full report contact Aon.
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