Aon–Willis tie can fill ‘innovation gap’ created by COVID-19

The re/insurance markets and society as a whole face a myriad of challenges which are almost unprecedented in their complexity and disruptive nature. But intermediaries in particular have a duty to help companies navigate these challenges.

That is the message from Eric Andersen, president and member of the global executive committee of Aon. He highlighted just how many factors have come together to create unprecedented market conditions, and while this means rates will increase it also means clients need help.

“Market conditions are very volatile at the moment due to several factors, including increased natural catastrophes, low interest rates, social inflation and adverse development of prior losses, which are all affecting the profitability of the market,” Andersen said.

“The COVID-19 pandemic has put additional pressure on the insurance market to a degree I have not seen in quite some time. It is not necessarily because of the magnitude of losses that have occurred but because of the complexity of challenges it created for businesses, communities, and individuals.

“Now businesses have even more to think about, prepare for and protect against. The response of the global insurance marketplace has demonstrated great resilience and agility—new technology, products and services have emerged at rapid speed to try to help clients adapt.”

He noted that all this activity has made insurance more expensive to procure in many segments, and capacity has had to be reevaluated to help minimise uncertainty. The industry has also seen new or expanded coverage terms, specifically with clarifications and restrictions being introduced.

“Policy language is of the utmost importance for both parties right now,” he added. “For example, infectious disease and cyber exclusions were a major factor playing into Q3 renewals around the world.

“Claims are being dominated by coverage questions and limitations related to non-physical damage and business interruption. I believe this activity will be ongoing for a significant period of time as coverage is tested.

“As long as uncertainty remains, it will continue to impact market dynamics for the foreseeable future. The role of the broker is more important than ever to help clients navigate all these factors, but more importantly, to advise them on how to best prepare for the future.”

New bonds
Andersen was speaking against a backdrop of the agreed tie between Aon and Willis Towers Watson. The deal, first announced in March, was ratified by shareholders in August and is expected to complete in the spring of 2021.

He believes that the combination of the two firms will create a company able to bridge the gap between three aspects of clients’ needs: risk transfer, advisory services and technology/analytics. He said that the challenges of COVID-19 have highlighted the need for such an offering in the context of the increasingly complex needs of clients and the existence of an “innovation gap”.

“Our world is becoming more volatile and interdependent than ever before, creating risks that are more interconnected and severe. While Aon and Willis Towers Watson have both made real progress in the industry, there is a reality that client needs continue to outpace innovation,” he said.

“By taking a bold step to bring our organisations together, we combine complementary solutions, capabilities, skillsets, and expertise that will allow us to accelerate innovation more quickly to address these unmet client needs.

“The combined entity will enable the firm to have distinctive client insight across segments and geographies and advanced analytical capabilities, which together will help us deliver superior outcomes for clients by creating access to new sources of capital and introducing new structures that improve client choice.

“Ultimately, we will be better positioned to address the innovation gap and help both clients and communities around the world be better prepared for long-tail risks that have a lasting impact on the global economy and society.”

Andersen added: “In times like this, our clients need our collective experience and insight like never before. Intermediaries and risk-takers alike—this is the time when our clients look to us to help them navigate the current situation,” he said.

“Now more than ever, it’s about having the right insights that can enable better decisions and help unlock new solutions for clients.

“We saw the COVID-19 pandemic wreak havoc on business continuity around the world, and it exposed even more the need to help clients better plan for the next long-tail risk on the horizon and build more resilient workforces,” he concluded.