Aon: Reinsurer appetite for earnings covers slowly returning ahead of 1.1.2025

Some opportunistic markets are set to meet the earnings protection challenge by providing solutions at the lower end of programs at the upcoming 1.1 renewals, Aon has forecast in an interview with The Insurer TV.

In a joint interview, Richard Wheeler and Tom Murray, co-leaders of Aon Global Re Specialty, highlighted the shifting dynamics in property renewals ahead of this year’s major conference season, where discussions around 1.1 renewals will formally begin.

Discussing the mismatch between buyer and seller expectations for earnings covers, Wheeler said: “Clients still have a need that's in some ways unmet by supply at the bottom end of their earnings need, but there's obviously improved premium to PML ratios that have given clients a buffer.

“As the market starts to soften a little bit, or stabilise within its current range, we should see some markets come in opportunistically, having raised capital specifically or issued a specific strategy to address that part of the curve, to try and capture leverage with clients.”

Murray added: “There’s a demand and clear need from our clients for support with earnings level protection. There’s a series of reinsurers lining up, telling us regularly, day in and day out, that they would like to help their clients meet their challenges.”

Wheeler said concerns over the potential for an active Atlantic hurricane season had prompted additional purchasing, both in reinsurance and retro, at the summer renewals.

Systemic cyber fears

Another key topic of conversation during the interview – which took place before last week’s CrowdStrike outage – was the extent to which systemic risk fears were driving the purchase of cyber reinsurance.

“The concern around systemic exposure is real. That’s when insurers start really bringing in very deep expertise to understand their exposures,” said Murray.

“Once insurers have a handle on their exposures then they can think a bit differently about how they transfer gross portfolio to their net portfolio, and that's what we're seeing firms doing at the moment. So, it's a reduction in quota share buying, an increased purchase of event cover.”

However, as Murray added, although cyber insurers are looking to protect themselves from systemic events, the supply of reinsurance in the space has started to drop slightly, as reinsurers are keen to take advantage of the increased rates in the property space.

“Ultimately, reinsurers want profitable portfolios. So, if they think they can make more money in cyber, they will, but if they can make more money in property cat, they’ll go and do that again.”

“When the property market started picking up, you saw a few people pulling back from cyber and going back to playing in property,” he added.

Watch the full interview to hear more about: