It’s an exciting time for property and casualty insurers and reinsurers around the world. Markets are evolving at an unprecedented pace, spawning equal amounts of challenges and opportunities. As a whole, the insurance industry is responding to these challenges with creative and innovative thinking.
Turning thought into action requires a helping hand from the reinsurance industry – a market sector with significant promise as it heads into renewal season, according to Andy Marcell, CEO of Aon Reinsurance Solutions.
“This continues to be a good time for our customers to buy reinsurance [because of] the imbalance of supply and demand. Supply continues to increase particularly from alternative capital, which is up from the first half of 2018 and we anticipate that will continue,” said Marcell at the PCI Annual Meeting.
“As you wrap around that, the alternative capital is mostly focused on property catastrophe risk, so […] that’s helping clients buy property catastrophe reinsurance at better rates. Additionally, the alternative capital is broadly embraced and integrated within most reinsurers’ capital solutions for clients, and we see that continuing. So, with our clients buying similar amounts of property catastrophe reinsurance and the available capacity continuing to expand – it’s a positive time for reinsurers.”
According to Marcell, there are also more opportunities for reinsurers to select risks and find new partners – especially in the North America markets where the purchase of casualty reinsurance is on the rise.
Another market trend impacting P&C brokers, carriers and reinsurers is consolidation. Mergers and acquisitions (M&A) are hot right now and they’re presenting challenges and opportunities for reinsurers. For example, when two firms become one via M&A, a client might reduce its reinsurance spend depending on the appetite and risk transfer mechanisms of the acquirer. On the other hand, some acquisitions create more reinsurance spend if firms find out they’ve got accumulations in aggregation that they don’t want to hold on their balance sheet, so they turn to reinsurance.
“There has been a ton of M&A of late. Whether you’re talking about AIG and Validus or Apollo and Aspen, those reinsurers are now owned by companies that have greater financial strength and flexibility, so when we’re representing our clients and we look at those counterparties, they’re stronger than they have been in the past and that’s good for our customers,” Marcell commented.
“Do we see M&A continuing? Absolutely. But on the other hand, it’s important for insurers to recognise that a lot of buyers value their trusted relationship with the reinsurers […] It’s an important way for them to differentiate and work to find bespoke solutions for clients.”