Well-balanced reinsurance supply & demand in Greater China at 1.4 renewals: Aon

Reinsurance supply and demand in Greater China are well-balanced at the start of 2025, with reinsurance conditions at the April 1 renewals building on the favourable trends seen at 1.1, according to global insurance and reinsurance broker Aon.

In its recent Reinsurance Market Dynamics report, Aon noted that in the Greater China region, capacity has increased and there is healthy competition in the market. As a result, pricing for loss-free property risks were down by low double-digits at 1/1 renewals. Meanwhile, price increases were generally limited to loss-affected programs.

Despite economic and geopolitical headwinds, reinsurance demand in China is stable, with insurers largely content with current limits, while inflation rates remain low. Aon expects China’s insurance market to generate single-digit premium growth in 2025.

The re/insurance broker observed that terms and conditions were largely unchanged at the recent renewals, with competition focusing more on rate than on coverage terms.

Aon highlighted that Typhoon Yagi, which struck China and Southeast Asia in September 2024, causing $700 million in insured losses, has spurred discussions on flood modeling after larger-than-expected flood damage. The recalibration of typhoon models following Yagi could impact future property catastrophe renewals in China.

Aon suggested that reinsurers with exposure to the Taiwan earthquake that struck the Yujing district on January 20, 2025, will be focused on profitability at future renewals. While not a major loss event, the quake comes as the reinsurance industry assesses wildfire losses in California.

Aon also noted increasing interest in alternative products, such as parametric solutions, catastrophe bonds, and sidecars.

“Both the Hong Kong and Chinese governments and regulatory authorities are keen to promote the catastrophe bond market while a growing number of the region’s more sophisticated reinsurers and insurers have successfully placed catastrophe bond transactions and are actively exploring options such as sidecars to tap third party capital sources,” Aon stated.

“In 2021, Aon structured and placed a $30 million cat bond for China Reinsurance Group, the first ever catastrophe bond issued from a Hong Kong-based special purpose insurer. With low insurance penetration and significant natural catastrophe exposures, the region presents a large long-term growth opportunity for the ILS market.”

Overall, Aon expects conditions in Greater China to continue moving in clients’ favour through 2025. However, property catastrophe reinsurance markets will remain cautious amid early-year catastrophe losses.

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