Aon’s Marcell: Reinsurers enjoy equilibrium, but some cedants questioning value amid renewals pressure

In an exclusive interview ahead of the Monte Carlo Rendez-Vous and to mark the launch of#ReinsuranceMonth, Aon’s Andy Marcell provides an insight into the evolving dynamics between reinsurers and cedants as the industry gears up for the critical 1.1.25 renewals.

The broker’s CEO of Risk Capital highlighted a growing tension within these relationships, driven by questions from cedants about the efficacy of their reinsurance purchases given recent market volatility.

The executive acknowledged that while reinsurers have enjoyed a period of profitability after years of underperforming their cost of capital, cedants are increasingly concerned about the value proposition of reinsurance.

“As we enter the renewal season again, prices, I think, will come under pressure,” he said.

“I think the reinsurers, who have posted some pretty tremendous numbers, they're happy and we're all happy that everyone can make money.

“But I think some of the clients are beginning to question whether the reinsurance they're purchasing is as effective as it should be when it comes to protecting the full capital stack and the earnings, given the volatility that's occurred in 2024 and how much has been truly reinsured,” Marcell added.

Discussing broader market dynamics, Marcell noted a relative equilibrium between supply and demand, although he stopped short of declaring a perfect balance.

He pointed out that while there has been no significant influx of new capital into the reinsurance market, existing players, buoyed by retained earnings, have been able to maintain a stable environment.

While discussing previous renewals in 2024, Marcell said: “We didn’t have any issue placing significant limits in the traditional marketplace, and the cat bond market has also been robust.”

Touching on casualty treaty, Marcell described the market as stable despite underlying concerns in the US. While casualty programs have been under pressure in 2024, Marcell said any significant changes in 2025 are unlikely unless there’s a major shift in reserving trends.

Advocating more skin in the game

Looking ahead to the 1.1.25 renewals, Marcell said he expected increased demand for reinsurance products, particularly driven by climate change and inflationary pressures.

He highlighted growing interest among cedants in securing more comprehensive protections, such as aggregate covers, to mitigate the increasing frequency and severity of catastrophe events. However, he cautioned that reinsurers might charge a premium for such protections.

“Most clients will buy more limits, and they do this sort of gradually through the year, which we’ve seen in 2024. I think one of the desires from a lot of the clients – not so much the globals, but the national and regional clients – will be to find ways to protect their earnings or their balance sheets by attaching lower down,” he said.

“As a result of that we are seeing some increased demand for aggregate covers or some form of sideways protection because the frequency that many of these companies are experiencing, whether it's severe convective storm, whether it’s wildfires, is meaningful.

“The reinsurers need to participate in that to some degree. Yeah, they're going to charge for it. But, when you get through the sort of tail end of the programs, there's going to be competition for that.

“There's going to be some pressure if reinsurers want to participate in the tail, in the scale that they want. They’ll need to be offering some of that sideways coverage down below. I think that's the message that the clients want to give and that’s certainly what we'll be advocating as a broker,” he clarified.

On the topic of cat bonds, Marcell noted that while 2024 saw record issuance, the trend is likely to stabilise rather than accelerate in 2025. He also touched on the potential expansion of parametric coverage, especially in niche areas such as cyber, where investor appetite remains strong.

Watch the full 15-minute interview with Aon’s Andy Marcell to learn more about reinsurer-cedant dynamics ahead of this year’s Rendez-Vous in Monte Carlo.