Many reinsurers ‘still firming up’ their 1/1 strategies: Aon

The industry usually gets a keen sense of the underlying dynamics around the year-end 1/1 renewal at the SIRC conference. But this year “many reinsurers are still firming up their strategies” pointing to some late negotiations this year, George Attard (pictured), chief executive officer, Reinsurance Solutions, Asia Pacific, Aon, told Intelligent Insurer.

He blames Hurricane Ian for making an already complex market even harder. But he is also confident capacity will be available in Asia-Pacific—at the right price.

“Coming out of this year’s Monte Carlo Rendez-Vous, the sense was the US would be a hardening to hard market; the rest of the world would be focused on available capacity, but dependent on pricing and structure. Then Hurricane Ian came along and created a bit more stress in the system,” Attard said.

He said that the messaging around 1/1 in Asia-Pacific comes through a global filter, but he added: “Aon thinks capacity will still be available in the Asia-Pacific region, but subject to pricing and structure. The markets will be looking for risk-adjusted pricing increases to compensate for the last five years of results.”

There will also be pressure on retention levels and structures, he suggested. “SIRC is an opportunity to get a sense of how the market is looking at 1/1. But it feels as though strategies are still being firmed up for many of our reinsurance partners. Part of that is because of the stress coming through on the retro side. That informs how they deploy capacity and what their strategies are.”

Attard said there will be a greater focus on risk selection and on clients able to articulate how they’re handling inflation ahead of 1/1. Understanding secondary perils—or frequency perils, as Attard calls them—will be important because flood, for example, is becoming very much a primary peril in this region, he said.

“There are many challenges facing clients in terms of how they articulate what their own view of risk is, how they’re managing inflation. That’s where we play a key part in helping our clients differentiate themselves to reinsurers while helping reinsurers make the risk selection across our client portfolio in Asia-Pacific.”

Attard said that earthquake and typhoon risks typically dominate how much coverage is bought in Asia-Pacific. But he said: “Over the last 10 to 15 years flood has played a big part across the region. The Malaysia floods, for example, were a significant event for the market and did impact pricing structure terms and conditions in that market.

“Many global insurers have an operation in Malaysia, so it’s impacted not just the domestic players, but also that global client segment.”

More recently, Pakistan suffered devastating floods. “While the insured losses coming out of that are relatively small, it continues to highlight the significant disparity we have in Asia between economic and insured loss.

“How do we help the industry improve insurance penetration? That doesn’t just come from the private market, it means working with governments as well,” he concluded.