Reinsurers are being forced to adapt as cedants demand more: Aon

Understanding risk is very different from simply discussing a price for transferring it. This is the new reality of what ever-more sophisticated cedants expect from their reinsurers, which must adapt or be left by the wayside. 

That is the view of Dominic Christian, global chairman of Aon’s Reinsurance Solutions. He told Monte Carlo Todaythat the reinsurance industry must adapt quickly to a new era where client demands have escalated beyond traditional expectations.

This evolution in client expectations reflects a broader shift within the industry and Christian notes that the days of simple transactional discussions are long gone. 

“We have to bring to that discussion a breadth and diversity of quality and capability that simply wasn’t necessary 30 years ago,” he stated. 

Today, reinsurance conversations are driven by the need for comprehensive, strategic advice rather than mere pricing negotiations.

Christian’s remarks highlight the growing complexity of the reinsurance landscape, where clients are no longer satisfied with standard solutions.

“We are expected, and we demand of ourselves, to provide not just transactional insight but also consultative and advisory advice,” he explained. 

This advisory role of reinsurance brokers extends to various aspects of a client’s business, from specific lines of insurance to broader issues and long-term strategic planning.

“In the current environment, this isn’t just about how to place a catastrophe reinsurance programme tomorrow,” Christian elaborated. 

“It’s about understanding the long-term implications of climate risk, the financial stability of our clients, and the broader economic environment in which they operate.” 

These expanded expectations require a new level of expertise and a deeper engagement with clients’ business models.

Broadening the scope

“In Monte Carlo, the conversation is very different today,” Christian observed. 

“We might be going from cyber to climate, from navigating net zero to reducing inflation. The discussions are much broader than they used to be.” 

This shift signifies a fundamental change in the nature of reinsurance discussions, which have evolved to cover a wider array of topics than ever before.

“In 1992, Hurricane Andrew struck from August 24, and I was one of the youngest attendees. Monte Carlo seemed bizarre and magical to me: I loved it, as I found myself on the periphery of meetings with very experienced professionals,” he said.

Reflecting on his early years in the industry, Christian recalls a time when reinsurance meetings were narrowly focused. 

“When I first went to Monte Carlo 30 years ago, I was still discussing: ‘What’s the price for this risk, for that layer at this moment, and what’s it going to be in three months’ time?’,” he recalled. 

“That still happens, but now the conversation is much deeper and more complex.”

This broadening of scope is driven by the emergence of new risks, such as cyber threats and climate change, which have introduced unprecedented challenges to the industry. 

“There will be wider discussions that include artificial intelligence (AI), the implications of geopolitical challenges, and more specific topics such as the future of investment performance and risk-free rates,” Christian said. 

These topics require reinsurance professionals to engage in multifaceted conversations that go beyond the traditional focus on immediate risk transfer.

Christian’s insights highlight the importance of staying ahead of these emerging risks and understanding their implications for the reinsurance market. 

“It’s a far cry from the days when the focus was solely on pricing and immediate risk transfer,” he noted. 

Today’s reinsurance professionals must be equipped to navigate a complex web of factors that influence the risks themselves and the strategies used to mitigate them.

“The discussions are much broader than they used to be.”

Diverse skillsets are the key

“The workforce is very different from when I started,” Christian reflected. 

“In 1986, the broker I was with had just employed its first non-life actuary; today, we have at least 500 people in the building who I would think of as climate modellers—climate risk understanders, if you like.” 

This evolution in the workforce addresses the need for diverse skillsets within reinsurance teams, and Christian explained that these highly specialised professionals are essential for tackling complex challenges and for providing the nuanced advice that clients now demand.

“These are experts in understanding risk, highly qualified and intensely knowledgeable.

“Alongside them, we have a huge actuarial workforce, as well as strategic consultants who are experts in how companies can grow and think about change,” he said. 

The integration of such diverse expertise is now a cornerstone of successful reinsurance operations.

“Unless you have that level of diversity and collaboration in the team, it is unlikely you’ll do great work for major clients,” Christian asserted. 

This emphasis on diversity is not just about having the right mix of skills but about fostering an environment where collaboration leads to innovative solutions that meet the complex needs of today’s clients.

Christian urged the reinsurance industry to adapt and innovate in response to emerging risks, adding: “Diverse skillsets within reinsurance teams are no longer optional; they are essential for navigating the challenges of a rapidly changing landscape.”

Monte Carlo and beyond

As the reinsurance industry gathers in Monte Carlo, Christian offered his thoughts on what lies ahead. 

“We’re in a fabulously interesting moment in the marketplace,” he said. 

“Everyone becomes, for a while, a Monte meteorologist.”

“Most people are ‘winning’, but we need to do something about certain lines of business, how we think about our clients’ retentions, and how we think about earnings protection.”

Christian expects conversations at Monte Carlo to cover a wide range of topics.

“Monte Carlo conferences often coincide with the peak of the Atlantic hurricane season, which can lead to disruptions or potential setbacks in progress, as seen with Hurricane Andrew in 1992—my first Monte Carlo—and others in 2001 and 2017,” he explained.

“Everyone becomes, for a while, a Monte meteorologist, as we’re all trying to guess what a particular weather pattern is going to do and what the impact on the market will be, although there’s definitely been a shift from high-level discussions to more diverse topics, including cyber threats, climate change, and financial matters. 

“There will be discussions about where catastrophe pricing should be, what the appropriate risk-free rate for next year should be, and how AI and geopolitical challenges will influence our industry,” he continued.

“The conversations now span a wider range of issues, reflecting an increased demand for in-depth knowledge and adaptability from brokers and industry professionals compared to 30 years ago.”

Watch the video below.

Christian believes that the future of reinsurance will be shaped by the industry’s ability to adapt to these challenges and continue to meet the needs of clients. 

“Be curious, be engaged, and don’t be afraid to share your opinion,” he advised those attending Monte Carlo for the first time. 

“You’re there because you have something valuable to contribute,” he concluded.

Dominic Christian is global chairman of Aon’s Reinsurance Solutions. He can be contacted at: dominic.christian@aon.com 

For more news from the Rendez-Vous de Septembre (RVS) Click here.

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