Aon unveils details of new units

Aon’s Reinsurance Solutions business will reveal more details of two new units this week: one focused on de-risking public sector bodies and a new capital advisory unit. Nick Frankland, UK chief executive, discloses more to Baden-Baden Today.

Aon’s Reinsurance Solutions business has unveiled a new unit specialising in helping public sector bodies and governments transfer risk. It has also revealed more details of its new Capital Advisory unit, which was launched in May under the leadership of Eric Paire, who joined Aon in March 2018.

Nick Frankland, UK chief executive of Aon’s Reinsurance Solutions business, said the new public-private enterprise (PPE) unit will be based in London and focused on closing the insurable protection gap by transferring risk into the private sector.

It will be led by Emma Karhan who, like Paire, joined Aon from Guy Carpenter, initially taking the role as head of terrorism specialty and reinsurer relationships in London. Frankland said there is a growing awareness of the benefits this can bring and this will help Aon's Reinsurance Solutions business to coordinate its own efforts and expertise in this space.

“We want to focus on how we can help fill the protection gap,” he said. “We will lobby and work closely with governments on all sorts of risks, but also climate change and more deep-rooted problems such as social and economic instability.

“We want to bring together the people most capable of making a difference, and governments to better understand how easily risk can be transferred to the private sector where there is an abundance of capital ready to be deployed.”

He said this applies both to emerging markets and to developed economies. The losses from hurricanes Harvey, Irma and Maria in 2017 aptly demonstrated how big the gap between economic and insured losses can be, even in highly developed countries such as the US.

“The proportion of the losses paid by the re/insurance markets was tiny compared to the economic losses. Yet those are risks we understand, we can quantify, and we want to be working with. We are happy to accept the risk, but nowhere near enough risk is being transferred.”

Frankland believes collaboration is the best way to tackle this issue. The wider industry has taken this approach increasingly in recent years—the Insurance Development Forum being one example.

“The burden of many large natural perils is falling on governments, which can struggle not just with the immediate challenges but also with years of reconstruction costs. Working in this collaborative way gives the effort more focus and drive, and this unit will allow us to contribute to that in a meaningful way,” he said.

The unit will also work closely with other parts of the Aon group including the US division run by Joe Monaghan—which has built a sizeable US mortgage credit re/insurance practice based around transferring risk from Fannie Mae and Freddie Mac—as well as Aon Securities, which recently structured the largest ever earthquake catastrophe bond on behalf of the World Bank.

Capital Advisory

The Capital Advisory unit led by Paire will fill the important role of working with clients to facilitate their use of multiple forms of capital.

“The new unit will focus on assisting clients with better managing capital through risk transfer solutions, offering them a broad capital service, to include structured reinsurance and alternative risk solutions, capital provision, business intelligence, financial modelling, and rating agency expertise,” Frankland explained.

It will also tap the resources of Aon Inpoint, the ILS and capital markets unit of Aon Securities, and Aon’s Investment Solutions for Insurers.

“Reinsurance is just one form of capital, whereas clients increasingly leverage many forms to achieve the best outcome for them—whether that is in the form of better risk management or to achieve capital optimisation on a wider scale,” he said.

“We recognise that clients now require that holistic approach, so we intend to combine the best and most relevant expertise we have in this space and offer them exactly that, in order to help optimise the use of capital across their operations.”

He noted that the Capital Advisory unit will be well positioned to help Lloyd’s syndicates impacted by the current profitability review.

“We have been responsible for bringing a lot of third party capital to Lloyd’s, and after this review there may be a few syndicates looking to solve problems. We will be able to offer a comprehensive service that addresses their challenges.”

Nick Frankland is the UK chief executive of Aon’s Reinsurance Solutions business. He can be contacted at: nick.frankland@aonbenfield.com

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