Insurers face headwinds on mid-year reinsurance renewals — Aon

By AIR team

Reinsurance capacity was generally available for June and July renewals, albeit with a range of outcomes for insurers driven by timing, structure, and peak zone capacity constraints, says Aon, a global professional services firm providing a broad range of risk, reinsurance, retirement and health solutions.

In its report entitled “Reinsurance Market Outlook June/July 2020”, Aon says that demand remained relatively stable as many governmental-related covers were pulled from the market offset by some insurers electing to secure additional capital to reduce volatility heading into a predicted, above-average hurricane season.

Despite different market dynamics than in many past renewals, insurers were able to secure needed limit in the face of already reported COVID-19 related claims, future uncertainty regarding macroeconomic trends and premium volume impact from COVID-19 for the longer term.

1Q2020 total global reinsurance capital stood at $590bn, a decrease over 2019 of $35bn, or 6%. This result was comprised of a 6% drop in traditional reinsurance and a 4% fall in alternative capital ending the quarter at $499bn and $91bn, respectively.

While traditional reinsurers saw impacts of COVID-19 that affected capital results at 31 March 2020, alternative capital remains impact by approximately $15bn in trapped capital as a result of recent major losses, now including COVID-19.

Outlook for premium levels

The report also says that premium levels for the remainder of the year remain uncertain as multiple factors impact outcomes from prolonged lower usage of cars to reduced patronage in retail stores and unfilled airline seats. These dynamics will in turn fuel different needs from insurers for reinsurance protection throughout the remainder of the year.

Property catastrophe losses through the first half of 2020 maintained near median levels of activity with approximately $26bn in losses accumulated to date. That said, above normal forecasts for the Atlantic Hurricane are predicted by National Oceanic and Atmospheric Administration, Colorado State University, and Tropical Storm Risk, which would be further complicated by issues related to COVID-19 in both avoidance by citizens and any clean up and repair.

The reduction in the amount of capacity actually available for deployment continues to affect the retrocession market in particular.

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