Reinsurance market conditions will hold, driving cedents to fac: Aon

The reinsurance market will likely retain conditions witnessed at the 1.1 renewals through the pending array of renewals deadlines, leaving cedents pressing for facultative deals to mitigate the new risk and volatility left on their own books, a top official at  Aon has said.

The spike in rates and tightening of terms and structures visible at 1.1 won’t likely prove a watershed for new capital to enter the market and alleviate supply constraints, Aon president Eric Andersen told his company’s Q4 earnings call.

Andersen hears “certainly a lot of whispering” about new capital, but no action. “You would have to think those market dynamics would continue” through the Pacific-focused April 1 renewals and the mid-year renewal deadlines with their focus on US coastal nat cat.

Andersen expects “facultative and selective buying throughout the year” from cedents now bearing more net risk than originally planned, he said of the upshot from 1.1 renewals. “More risk, more volatility has been pushed on the primaries.”

Aon CEO Greg Case (pictured) calls that a bolstered business opportunity coming out of 1.1. “More risk is more opportunity to demonstrate value added” for primaries, he quipped.

Property cat has stolen the headlines at 1.1 and remains the “dominant part” of Aon’s reinsurance broking business, but Andersen called out “robust opportunity” also lurking in specialty-casualty.

At the level of primary insurance, reinsurance costs will have their most clear kick-on effects in property pricing, Andersen noted. Casualty, in turn, is enjoying a “stabilisation of that market as more capital has come into those areas.”

Aon’s Reinsurance Solutions division laid claims to 9% organic revenue growth in Q4, reflecting double-digit growth in both the Strategy and Technology Group and in facultative placements. Market impact was called “modestly positive” on Q4 results. Q4 is focused on facultative transactions as opposed to the major treaty renewal dates in the first half of the year, Aon reminds.

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