Global insurance and reinsurance brokerage group Aon reports that competition among U.S. reinsurers is particularly fierce as protection buyers take advantage of favorable 1.1 renewal dynamics.
Aon will publish its full January 2026 Reinsurance Market Dynamics Update report next week, but in the meantime, the broker has provided some insight into its 1.1 analysis.
The report will reveal that cedants benefited from favorable dynamics at 1.1, thanks to record capital levels following another year of strong earnings for reinsurers, as well as a milder 2025 Atlantic hurricane season, which Aon said has led to tight competition in the market.
Notably, competition among U.S. reinsurers is fierce, with preferred risks “typically achieving healthy double-digit rate declines on January 1,” while Europe and Latin America also saw double-digit declines in renewals, with a few exceptions. In the Asia-Pacific region, interest rates on accounts not affected by losses fell by nearly 20%, according to Aon.
Alfonso Valera, CEO of Aon Reinsurance Solutions International, said: “Buyers returning to the market will find a variety of complementary reinsurance and capital products. Increasingly, frequency coverage and income protection. We are seeing growing interest in bespoke transactions such as structured solutions, loss portfolio transfers and temporary reinsurance, including hybrid treaty/temporary facilities.”
In real estate, Aon noted that insurers achieved deep discounts and improved terms in 1.1, with competition “more intense and widespread” than in 1.1 2025, as sellers showed greater flexibility and appetite for risks that had previously been outside or on the margins of their portfolios.
Aon said: “The increasingly favorable temporary reinsurance market provides insurers with an increasing number of flexible and complementary solutions to reduce portfolio risk and support growth. We expect the temporary market to continue to grow in 2026.”
While Aon’s full report will delve more deeply into the pricing dynamics of 1.1, the company’s comments today suggest further weakness in the property and casualty reinsurance space is to be expected.
Meanwhile, casualty reinsurance conditions remain favorable to buyers in 2026 at 1.1, supported by increased capacity and reinsurer risk appetite, which Aon said is increasing competition in international casualty insurance and the stability of the U.S. insurance business.
Aon explained that despite the challenging U.S. tort environment, improving performance, strong underlying primary markets and attractive investment returns mean casualty insurers are well-positioned for policy renewals.
“In a world of increasing risk and uncertainty, businesses and governments are looking to insurance companies for solutions. Insurers can stay competitive and stay relevant to their customers by leveraging attractively priced, diversified capital and revisiting their long-term strategies and product portfolios to support growth and optimize coverage. Developing best-in-class strategies – from capital deployment and talent to distribution focus and underwriting innovation – is critical to thriving in today’s attractive but dynamic market,” said Stephen Hofmann, CEO of Reinsurance Americas, regarding Aon’s solutions.
The broker’s report will also highlight that while cedants are “generally satisfied” with current levels of protection at the time of key renewals in January, many buyers are expected to explore other solutions to protect earnings and support earnings growth plans in 2026.
Additionally, Aon’s report will explore the industry’s capital levels, with the broker highlighting that global reinsurer capital is expected to reach a record $760 billion as of September 30, 2025, an increase of $45 billion from the previous year, driven primarily by reinsurers’ retained earnings.
According to Aon, the average annualized return on equity for the reinsurance industry in the first nine months of 2025 is 16%, well above the average cost of equity.
“Record industry capital positions were supported by a relatively mild Atlantic hurricane season and increased interest in insurance risk from third-party capital providers. Third-party capital reached a new high of $124B at the end of Q3, up $9B from the same period last year. The catastrophe bond market ended the year at an all-time high, with 74 sponsors issuing over $24B of bonds and $58B of catastrophe bonds outstanding. Sidecar The market also continues to see exciting growth in 2025 with new (re)insurers, new investors and new structures.
Another highlight of the report, and a recent discussion among Aon executives, is that record reinsurance industry capital levels are expected to support growth in cover for emerging risks, particularly the $5 trillion to $10 trillion in data center investment expected by 2030, which will require significant re/insurance capacity.
“Similarly, the changing regulatory and litigation environment is expected to drive growth in liability insurance demand. A recent study by Aon estimated that new risks in the casualty space could contribute approximately $5B in annual reinsurance premiums,” the broker said.
