Aon highlights growth amid rising losses in 2024 insurance renewal report

Aon has released its “Ultimate Guide to the Reinsurance Renewal – September 2024” report, which highlights the contrast between the strong financial results of the insurance industry and the challenges that insurance representatives face amid growing losses and complex risks.

The report emphasizes the industry's potential for growth, noting that the global insurance ratio of gross domestic product (GDP) has remained close to 1.8% since 2010. This is despite increased exposure and unmet customer demand, indicating areas for potential expansion.

In the first half of 2024, natural catastrophe re/insurance premiums were $58 billion, well above the ten-year average of $47 billion. Despite these payments, the insurer recorded an average return on equity (ROE) of 17.6% over the same period.

Aon's analysis of 100 global re/insurers found that some of the major players reported ROEs in excess of 25%, outperforming most major insurers and exceeding their cost of capital. This strong financial performance could drive further growth.

However, the report points to uneven profitability across the insurance value chain. High retention in catastrophe plans of insurers has limited capacity for frequency coverage, leading to an uneven distribution of underwriting profits.

Global insurance premiums reached a record $695 billion as of June 30, 2024, an increase of $25 billion from the end of 2023. This increase was mainly due to retained earnings, rising income from the distressed bond market, and recovering asset prices.

A survey of re/insurers showed an average annual investment yield of 3.8% in the first quarter of 2024, up from 3.1% last year.

Insurance prices began to decline gradually in 2024, in part due to an increase in premiums, which reached $110 billion. Insurers also offer highly effective risk reduction. Aon predicts that price competition will increase by 2025, giving insurers more flexibility in terms of volume and coverage.

Rupert Moore (pictured above), UK CEO of Reinsurance Solutions for Aon, commented that the insurance market must play an active role in managing loss frequency and income volatility. If reinsurers continue to avoid risk, insurers may follow suit, reducing the value of the industry.

Moore said Aon's role is to bring clarity and confidence to risk management, help facilitate better decision-making and highlight opportunities for profitable growth.

The report also highlights the volatility experienced by reinsurers/representatives in 2024, driven by various events such as earthquakes and plane losses in Japan, the collapse of the Baltimore bridge in the US, major floods in Dubai, and the global computer outage in CrowdStrike.

According to Moore, these events underscore the industry's recurring themes, including increased risk communication, loss volatility, and the growing gap between insurance losses and the economy.

The industry must adapt to the opportunities presented by changing risks or the risk of seeing more of that risk absorbed by the public sector and financial markets.

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