Pandemic accelerates intermediary trend in life reinsurance

​A particular trend in life reinsurance has enabled the life business at Aon to grow and, according to Colin Dutkiewicz, head of Aon’s Life Reinsurance, the global pandemic has boosted this trend further.

Dutkiewicz explained that a trend has started in the past four or five years, with a movement from life reinsurance being purely direct-placed to being intermediated or advised in some way.

“At Aon, we’ve grown our life practice and hired people on a global basis to offer an increasingly broad advisory capability to look at life reinsurance.

“The global pandemic has accelerated the demand for this advisory capability significantly because the cedants, clients, have needed clarity from their insurers about the current situation and what to expect going forward,” he said.

Cedants had approached Aon for its expertise in this area, he added.

“We give them logical, rational ideas of what we believe is going to happen based on our analytics, expertise and insights. They’ve found the process interesting and have told us that the work has been highly valuable, and that Aon’s life team is giving them an independent impartial view of the world and what could potentially happen.

“It has been tremendously good for our business, in terms of our connections with clients and providing advisory information to them.

“The more business-specific part of that is that the big life reinsurers like doing quota share business where they’re taking a substantial portion of the entire portfolio, for example 50 percent of the entire portfolio for the next 50 years. It’s proved to be very profitable.”

Non-life business
“What they are more reticent about is taking more of the non-life type reinsurance—one-year renewable, stop loss, and other non-proportional type business. This kind of business doesn’t offer the big reinsurers enough premium revenue or enough profitability,” Dutkiewicz explained.

“The pandemic makes this situation worse for them because while the cedants want protection against pandemic, reinsurers are more reluctant to give protection against pandemic risk but will offer to take the whole portfolio at accretive terms.”

Because Aon works with the full market and range of capital, in terms of reinsurers, insurance-linked securities funds and other participants, this shift has meant it can advise life insurers on a variety of options, and with some advisory assistance, Aon can help them find an appropriate place for the risk.

“In this way, we’ve had success in managing to match cedants’ risks with a range of cover, and not just that offered by traditional insurers. It’s an extremely client-centric process,” he concluded.