Aon: Record capital set to drive more flexible reinsurance market in 2027

Reinsurers remain on course for a fourth consecutive year of strong earnings, despite continued market softening, Aon said in its pre-Monte Carlo Rendez-Vous briefing, pending a quiet end to the hurricane season or other unexpected events.

Mike Van Slooten, head of market analysis, reinsurance, said that for the group of reinsurers tracked by the broker there was an average reinsurance-specific combined ratio of just over 85% for the first half of 2026, around 10 points better than a year earlier, while annualised return on equity averaged 15.5%.

Aon estimated global reinsurer capital at about $800bn at 30 June, he said, up $15bn over the first half, with both traditional equity and third-party capital at record levels.

“Overall, to sum the situation up, I think we are clearly, based on those conditions, expecting to see a more flexible reinsurance marketplace in 2027,” Van Slooten said.

“That really gives buyers the opportunity to review their current strategies, and forward-thinking reinsurers the opportunity to demonstrate increased relevance in today’s challenging risk environment.”

Amanda Lyons, Bermuda CEO, reinsurance and global product leader, Reinsurance, said Aon was seeing “unprecedented levels of capacity in almost every line of business across our portfolio”, creating an opportunity for cedants to reconsider how programmes are structured.

Property remains strongly profitable for reinsurers, despite softening prices, after a benign first half of the year for nat cat claims.’

Meanwhile casualty capacity is also increasing, while Lyons said alternative capital entering casualty through sidecars is becoming an increasingly prominent market force, generally used to supplement rather than replace traditional reinsurance.

Cyber, meanwhile, remains under pricing pressure on the US primary side, she explained, with ample reinsurance capacity likely to drive further concessions.

Aon also sees greater need for dedicated catastrophe or aggregate structures to isolate systemic, correlated cyber exposures, she added.

Capital options widen

Capital diversification was a wider theme. Kelly Superczynski, head of global capital advisory, reinsurance, said insurers should look beyond traditional reinsurance to sidecars, new Lloyd’s syndicates, structured reinsurance and legacy solutions, but warned against starting with the product.

“Strategic thinking should start with business objectives and not the product,” she said. “We really need to start with what the company’s strategic goals are.”

Richard Pennay, CEO, Aon Securities, described the insurance linked securities (ILS) market as being at its strongest point in more than 20 years, with $145bn of capacity. 

Pennay said the ILS market had grown at about 13.5% annually over the past three years, while catastrophe bond issuance had reached $18bn for the year to date.

“There will be strong demand as we go into year end and further into 2027,” Pennay said, pointing to buyers’ ability to lock in multi-year capacity at more attractive pricing than in prior years.

Growth and AI

Aon took some time to discuss technology as a driver for growth, particularly around artificial intelligence (AI).

The broker highlighted digital infrastructure as a major growth opportunity. George Attard, chief strategy officer and head of analytics, reinsurance, said the sector could involve $7tn-$10tn of cumulative capex and up to $30bn of annual premium by 2030.

Paul Campbell, global growth officer, strategy and technology group, reinsurance, said carriers were increasingly investing recent profits in underwriting, exposure management, technology and AI to protect competitive advantage as market conditions soften.

Emma Crookes, global insurance vertical leader, said AI adoption was accelerating faster than workforce readiness.

“Insurers who will win are not simply going to replace people with models, but are going to redesign how they work and collaborate with AI,” she added.