According to Aon’s April renewal report, the reinsurer’s average return on equity (ROE) reached 17%, supported by solid investment performance, marking the third consecutive year of strong underwriting performance and retained earnings.
With this in mind, the company said it expects reinsurers to continue to generate returns above the cost of capital through 2026, assuming ceding losses remain within forecast levels.
However, rising geopolitical tensions, including conflicts in the Middle East, and capital market volatility may increase uncertainty in the global economy.
Elsewhere in the new report, Aon noted that global reinsurance demand increased by about 10% at renewal on April 1, as buyers took advantage of favorable market conditions to obtain more comprehensive protection, with some expected to return to the market for additional purchases after renewal.
According to reports, in some Asia-Pacific markets, interest rates have fallen by as much as 20%, highlighting the strength of buyer leverage supported by sufficient production capacity.
Aon continued: “In key Asia-Pacific markets such as Japan, South Korea and India, reinsurance buyers received double-digit rate cuts on the back of ample capacity and a relatively mild period of catastrophe losses.
“In the U.S., competition between traditional and insurance-related securities markets responded to increased buy-side demand and resulted in double-digit pricing declines. U.S. insurers also took advantage of favorable buy-side conditions to transfer more risk to reinsurers through increased limits, frequency coverage and proportional trading.”
Aon said global reinsurance capital reached a record $785 billion on April 1, allowing its insurance clients to significantly reduce risk-adjusted rates at renewal, continuing the favorable momentum seen during the reinsurance renewal period on January 1.
“The sharp increase in alternative capital has also expanded balance sheets and increased competition, thereby increasing buyer leverage,” the firm added.
Aon’s report continued: “Competition in property and casualty and lower-tier reinsurance programs is particularly fierce as reinsurers and insurance-related securities investors aggressively deploy capacity in pursuit of growth.
“Favorable buying dynamics translate into better pricing, broader coverage options and more flexible plan structures, while higher commissions on prorated placements, expanded limits and extended catastrophe towers enable insurers to increase protection value while lowering overall plan costs.”
George Attard, chief strategy officer and global head of analytics at Aon Reinsurance Solutions, commented: “Taking a proactive strategic approach, leveraging reinsurance capital as an enabler, enables our insurance clients to address risk and drive profitable growth targets in 2026 and beyond.
“In this environment, reinsurance provides insurers with powerful tools to manage volatility, protect profitability, invest confidently in new business lines, geographies and emerging risks, and pursue inorganic growth opportunities – a key trend highlighted in our report. These actions will help insurers outperform their peers as the market cycle evolves.”
Steve Hofmann, Americas CEO of Aon Reinsurance Solutions, added: “The combination of strong capital strength and disciplined underwriting provides confidence that current pricing levels remain sustainable, allowing buyers to benefit from today’s improved protection without compromising long-term market stability.”
Looking ahead, Aon observes that pressure for rate cuts on primary pricing is expected to increase over the next 12 to 18 months, leading to a greater emphasis on capital efficiency and disciplined growth.
Alfonso Valera, CEO of Aon Reinsurance Solutions International, concluded: “As volatility increases and primary market competition intensifies, insurers are increasingly turning to reinsurance as a strategic tool rather than purely transactional purchases.
“Buyers are exploring a broader portfolio of solutions – including facultative reinsurance, portfolio facilities, proportional insurance and multi-year arrangements – to smooth returns, reduce capital costs and support long-term planning.”
