Aon global chair, Reinsurance Solutions, says insurers have opportunity to export climate knowledge

Insurance has never been more central to society than it is today, according to Dominic Christian, global chairman, Reinsurance Solutions at Aon.

The industry is very involved in climate, geopolitical issues such as terrorism, and thinking about cyber.

“The risks of the age are right at the heart of what we do and try to understand,” Christian told SIRC Today.

“If we take catastrophe, weather, and modelling of the risk, we have been involved in this for nearly 40 years.

“Trying to think about weather risk isn’t new to us, whereas it seems new to some people, so I think there’s a tremendous opportunity to export our knowledge.”

The issue of climate change was high on the agenda for delegates in Singapore. Christian said: “I think there will be much more conversation moving in that direction, if not in the next couple of months, certainly during the course of next year.”

Another big topic at SIRC has been the ever-increasing focus on being part of the Asia-Pacific growth story, he said.

“That will continue to be central to many of us who are involved in the business. You are in a region that is naturally building, which is a joy to be part of.

“You don’t just ride it however because there is growth, you try to impact how you see that growth should be.”

Historically, most of the business in the region was around standard P&C lines, while there has also been success in agricultural and health and other areas such as cyber.

“We’ve not only added to our product suites in cat insurance, which we feel are very significant in terms of our operation, but also in terms of other classes.

“There is much more breadth to our activity than would have been the case 15 years ago,” Christian said.

“We will be more engaged in the casualty market globally, and there are going to be far more opportunities for us to be involved with D&O, professional indemnity and financial lines generally. Those lines are going to continue to thrive and grow.”

Christian is clear on the challenges Aon and the wider industry face.

“Our challenge is to ensure that each client story is heard properly; that the cultures of different parts of Asia and the varied dynamics of different markets, and the individual companies within them, are recognised.

“As with any part of the world there are extremely sophisticated and able organisations and those that are younger in thinking. You are trying to provide a service to both, but the service might be slightly different.”

Investment yields
Identifying the most specific trends that affect Aon from a macro perspective, Christian highlighted the role of interest rates and investment yields.

“If investment yields are going to fall, as many predict, that has a meaningful effect on how people think about their casualty re/insurance business, for instance,” he said.

“That’s where the global macro effect has more specific local realities.

“You have to assist your clients’ understanding of the reinsurers’ challenge in assessing their risk and the future earning power of that risk. What we have to ensure is that there is a mutual understanding of how a contract could perform.”

Christian added that Aon has heard from a number of large reinsurers that they expect an investment yield lower in the near future than they have seen in the past, and that they are factoring that into their calculations of return.

He said that renewals had, unsurprisingly, been discussed widely, while another talking point at the event was around the pricing rate and dynamics relative to that.

How Aon supports its clients in terms of the claims they may be making to their reinsurers in the coming months has turned to Japan and the recent typhoons.

“Renewal season is April 1, which will come around fast,” Christian added.

“There has been a lot of talk about the retrocession market and the fact that it is potentially going to have to respond to the losses of this year in a significant way, and therefore how much retro capacity will be available on January 1.

“It will be lower than what was available on January 1, 2019, but I suspect in Asia it won’t be as significant as elsewhere.”

Retrocession has less impact in Asia and South East Asia although Japan is a different conversation than other parts of the world, particularly those with dollar exposures, Christian explained.

“Reinsurers writing Asian business are a little less reliant on them because it is not a peak exposure relative to those writing business in California or Florida, or European windstorm, and so on. There’s less pressure in the system,” he concluded.