As anyone who is familiar with our industry will attest, insurers and reinsurers provide a vital foundation for economic trade and stability – a privileged position we have held for more than 400 years. In modern times, most innovation would simply not have occurred were it not for the ability for communities and commerce to effectively mitigate risk via (re)insurance.
As an industry, it is therefore our responsibility to continue to provide access to risk transfer solutions that keep pace with evolving societal demands, and that are backed by appropriate and stable levels of capital. In this regard, reinsurance acts as an important cog in an engine that drives not just the processing of ‘known’ large, complex and volatile risks, but also emerging risks, such as cyber and IP, where we need to continue to invest in risk awareness and understanding.
Reaching mutually agreeable outcomes
In order for us to continue to operate as a fluid (re)insurance marketplace on behalf of clients, we have to ensure that both buyers and sellers of risk can come together to conclude a transaction. This requires effort and understanding on both sides in order to reach a mutually agreeable outcome. The reinsurance market has recently faced an increase in frequency and severity of losses, whether those be man-made or natural peril, and has performed robustly in its response; however, we now face headwinds that present different challenges to our relevance and sustainability, and it is our responsibility to meet them head-on.
In certain lines and geographies, we have moved away from the fine balance of delivering cost-effective and efficient solutions that allow stakeholders to manage their risks within their risk appetite and provide acceptable returns to capital providers. This mismatch causes friction and uncertainty. And while there needs to be a sufficient level of premium to generate returns for all stakeholders at the existing levels of capital, it is important that we continue to bring new capital to our industry to ensure a functioning, competitive marketplace for many years to come.
Level of certainty in an uncertain environment
We have equipped our colleagues to help our clients to understand the existing dynamics so that they are prepared for the upcoming renewal. Our client response has been tremendous, and for that we thank them. But they now need their reinsurance partners to provide quotes that enable transactions to be concluded.
Our clients are looking:
For their capital providers to offer them a level of certainty in an uncertain environment.
To lock in their cover in a timely manner and then move with confidence into 2023, seeking opportunities not just to grow their own business, but the businesses of their carriers. At Aon, we are facilitating this process by investing in the better understanding of risk, so we can help generate premium in previously unexplored areas.
Sufficient governance time for quotes to be reviewed and accepted. We understand reinsurers’ need for certainty around capacity deployment and the associated pricing in this dynamic marketplace, but while our clients are willing to move fast, they still need time.
The reinsurers that are demonstrating an understanding of client needs and a longer-term commitment to providing sustainable solutions in a consistent and thoughtful way are becoming more successful, and we are already seeing examples of entities raising capital in order to seize opportunities in the current environment. We believe that the renewals period represents a time to move towards, not away from risk, and those that do so will be rewarded for their endeavours. In this relationship business, anyone that steps up to the plate will be remembered and valued as a true partner. This industry was built on the sharing of risk and reward, and if we work together this will continue to be the case.
Be the solution
We recognise the challenges many reinsurers face; however, those reinsurers that seize opportunity will be remembered as economic enablers for years to come. We need to be part of the risk management conversation; be the solution, as if we shy away from taking risk, we ourselves risk losing relevance as clients identify alternative, sustainable and consistent options to manage their exposures.
We are the risk experts. We have been here before, but now is our time; let’s use it wisely as an industry to provide solutions that allow us to continue to grow our marketplace, innovate around new products, and meet the ever-growing needs of the global economic, interconnected world in which we live.
Please be assured that Aon has, and continues to, invest heavily in resources to support all our clients in their desire to understand, manage, and transfer risk. We will continue to work collaboratively with our partners to ensure we have a robust, vibrant and healthy marketplace for the future. In an industry where we pride ourselves on the strength and longevity of our relationships, we need to demonstrate our intentions through our actions in the marketplace.
To return to my opening analogy: if the cogs in the (re)insurance engine are not lubricated by a steady flow of capital, the machine grinds to halt and hinders productivity in the global economy.
In terms of our own position, we will continue to be pioneering on behalf of our clients to protect and enrich the lives of people around the world.
Andy Marcell is CEO of Aon’s Reinsurance Solutions