Reinsurance capital grows, ILS investor base broadens = more savings to come for clients: Aon

With record levels of capital in the reinsurance sector and a growing insurance-linked securities market with a broadening investor base, executives at Aon said today that there are more savings to come for clients, with property rates likely to fall in the region of 10% at the January 1 2027 renewal.

Speaking during a briefing held for clients and media in advance of the 2026 Monte Carlo Rendez-vous event, senior executives from Aon’s reinsurance broking arm painted a picture of a buyers market opportunity.

A defining feature of the reinsurance market is the level of capital currently in it, the executives said, although this does not always translate into better outcomes and it is the strategic use of capital that really matters.

Mike van Slooten, Head of Market Analysis, Reinsurance at Aon, explained, “Recent profitability has driven the availability of reinsurance capacity to new heights. Aons’ estimate of global reinsurer capital has increased by $15 billion to $800 billion over the six months to June the 30th, with both traditional equity and third-party capital at record levels.

“Importantly, we also see a broadening of the investor pool, which is further expanding the market’s ability to take on risk at favourable terms”

van Slooten further stated that, “I think we are clearly, based on those conditions, expecting to see a more flexible reinsurance marketplace in 2027, and that really gives buyers the opportunity to review their current strategies and gives forward-thinking reinsurers the opportunity to demonstrate increased relevance in today’s challenging risk environment.”

Amanda Lyons, Bermuda CEO and Global Product Leader for Reinsurance, commented, “We’re really seeing unprecedented levels of capacity in almost every line of business across our portfolio. We really see this as an opportunity for clients to reset their programmes. How can you future-proof your reinsurance programme so if there is a market change, or an event, you’re in the best possible position for resiliency?”

Lyons went on to discuss property reinsurance market dynamics.

She explained, “In property, we still see strong double-digit ROEs for reinsurers. Pricing is still about 30% over the index at the height of the soft market, and when you couple that with the fact that the five-year average annual cat loss amount is about $114 billion, and year-to-date we’re sitting at around $75 billion, so there will be more savings to come.”

She clarified, that for property reinsurance renewals Lyons expects rate declines to be, “Not to the extent we saw at 1/1 ’26, but likely in that 10% off range.”

Lyons said that for clients the important questions are how those savings can be used to address frequency protection or in addressing their retentions, or simply to fortify profitable year-end results.

Lyons further stated that this leads to a dynamic and exciting situation for Aon and its clients, as the increased capital and higher volatility in the global environment is also driving innovation.

Lyons then moved on to speak about casualty reinsurance, where she also said an influx of capacity is being seen.

“The other market force in casualty is really the prominence of that alternative capital coming in via sidecars. The investor interest in the casualty business is significant, and there’s not a conversation we’re having with a casualty insurer or reinsurer where the topic doesn’t come up,” Lyons said.

She continued, “We think to-date most clients are utilising this capacity in the right way, not replacing traditional reinsurers, but really using the capital to supplement their existing programmes and manage the cycle.”

Summing up on casualty reinsurance by saying, “So, with continued positive rate movement, relatively high interest rates, and increased capacity, we think insurers with good limits management, a positive rate story, and disciplined underwriting will see reductions at 1/1.”

George Attard, Chief Strategy Officer and Head of Analytics, Reinsurance at Aon, stated during the briefing, “Global reinsurance capital has reached upward of $800 billion, so traditional reinsurer balance sheets remain strong. Institutional and third-party capital will continue to expand, and capital is increasingly available for a broader of structures and solutions, from treaty and FAC, to facilities, structured solutions, sidecars, ReShares, cat bonds, and other forms of institutional capital.

“This, of course, creates greater flexibility for our clients, creating opportunities to seek profit and growth, which means moving the discussion from one of price and capacity to the value that reinsurance creates and the strategic partnership required to turn that capital into growth.”

Like other brokers, Aon is expecting favourable conditions for buyers at the January 2027 reinsurance renewals, with a chance to expand coverage and take advantage of capital availability to lock in longer-term covers from the insurance-linked securities (ILS) market as well.

The projection for around 10% of additional property reinsurance rate softening at 1/1 2027 is not unexpected.

Absent some kind of dislocating event in the final months of this year, the trajectory seems set and so the onus for capital providers will remain on disciplined selection of opportunities and capital deployment.