Property catastrophe rate pressures weakened at the mid-year reinsurance renewals, eased partly by new capacity from the cyclone reinsurance pool, Aon says.

“Despite headwinds, the 2023 mid-year renewal was orderly and capacity was sufficient, albeit at elevated pricing,” the global broker said in a market update.

“The market benefited at the mid-year renewal from new capacity provided by the [pool]… as a result, the market purchased around 10-15% less catastrophe limit at mid-year than in 2022, easing demand-supply pressure at the renewal.”

Aon says the pool, backed by a $10 billion government guarantee, is set to assume more than 90% of the market’s cyclone exposure for household, strata and small business property insurance policies.

The mid-year renewals are a key period for the Australian market, with the majority of property catastrophe accounts renewing at June 1 and July 1.

The market had been bracing for a tough renewal season after last year’s floods and the record-breaking weather events in New Zealand this recent summer.

But Aon says there has been a “major shift” in reinsurer appetite since the January 1 renewals, which are dominated by the US and European markets.

“Capacity was more readily available and some reinsurers showed a greater willingness to grow,” the Aon Reinsurance Market Dynamics June and July 2023 report says.

“The 2023 mid-year renewal was orderly, albeit late. Capacity was stable and sufficient to meet demand, despite a number of significant catastrophe events in recent years.”

The Aon report says pressure on terms and conditions seen at January 1, particularly around named perils, eased at the mid-year renewals.

“At current pricing and retention levels, the reinsurance market has found a new level where it can make sustained returns and provide volatility protection for insurers,” the report says.

“However, catastrophe losses in the second half of the year, and changes in demand and supply, will be key to renewals in 2024.”

Click here for the report.