Reinsurance renewals for April have shown a continuation of January trends and point to favourable conditions for the mid-year period, Aon says.

The April renewals are focused on Asia, where loss activity has been relatively benign, and a competitive reinsurance market resulted in “much-improved pricing” for most insurers.

“The positive renewal bodes well for upcoming mid-year renewals, when we expect buyer-friendly conditions will prevail, supported by robust levels of capacity and reinsurer appetite,” Aon says.

Insurers in Japan and South Korea secured double-digit reductions in risk-adjusted property catastrophe rates.

Strong reinsurer earnings have generated new capital over the past two years, allowing them to consider deploying more capacity while offering higher dividends and share buybacks.

Global reinsurer capital reached a record $US715 billion ($1.1 trillion) last year, driven by retained earnings and an expanding catastrophe bond market.

“We expect to see opportunities for insurers to explore frequency protections and top-up covers as we approach the mid-year renewals, especially for those insurers that concentrate on the key characteristics of high performance,” Aon Reinsurance Solutions Asia-Pacific CEO George Attard said.

Aon says ceded losses from the California wildfires appear to have absorbed 25%-33% of major reinsurers’ annual catastrophe allowances, resulting in heightened sensitivity to losses in the remainder of the year, but it notes Hannover Re, Munich Re and Swiss Re have not revised guidance for stronger earnings this year.

Gallagher Re says the April 1 renewals brought “more capacity and optionality for buyers, specific to class of business, geography, performance, strategy and scale”.

Headline rate changes in Japan showed accelerated softening relative to the major international renewals at the start of the year, but the broker says the country’s insurers had faced significant price increases after typhoons in 2018 and 2019.

“We therefore entered the 2024 renewal with catastrophe pricing at close to historical highs and with the impact of previous losses largely addressed,” Gallagher Re says.

Mid-year renewals with wider geographic footprints are expected to provide better insights on the market impact of the Los Angeles wildfires.

“What is clear is that these losses will fall asymmetrically, with a much higher concentration of loss on a limited number of primary carriers,” Gallagher Re says.

The latest California wildfire loss estimates are near $US40 billion ($63 billion) gross, remaining manageable and sitting within reinsurer natural catastrophe budgets, although the traditionally higher catastrophe loss quarters are still to come, the broker says.