For reinsurers, there will be ample opportunity in the property catastrophe space at renewals, for those that can navigate market challenges and manage a portfolio of natural catastrophe risks, Aon’s Reinsurance Solutions CEO Andy Marcell said today.
Speaking during a pre-Monte Carlo Rendez-vous briefing just now, Andy Marcell, the CEO of broking group Aon’s Reinsurance Solutions arm, highlighted some of the factors that are going to make the renewals at the end of 2022 challenging, but will also lead to opportunity for forward-thinking reinsurance underwriters as they move into 2023.
He began by positioning the reinsurance market as a “tale of two cities.”
On the one side, the property reinsurance market, where conditions have been most challenged, the other the casualty and specialty lines, where there remains “ample appetite and interest.”
“The property side, there’s been a lot written about what’s been going on in the marketplace, and simply put, of late with inflation and property, there’s obviously a growth in values and TIV’s and as a consequence, many of our clients around the world will be seeking to purchase more limit,” Marcell explained.
But this increasing demand for cover comes at a time when some reinsurers have been reducing their appetites for catastrophe risks and anything exposed to climate change.
Marcell continued saying this could be a stretch because of, “Doing that at a time when several of the reinsurers, reflecting on past experience for them and in particular how reinsurance fits their overall business proposition, have moved away from the volatility of property cat at the current pricing levels and have emphasised growth in their insurance portfolios.”
“So as a consequence, you know, we have somewhat more demand and less appetite for property cat,” he summed up.
As a result, Marcell said that at Aon they expect a reinsurance “marketplace that’s going to need more navigating, than in the past few years.”
But his company things it can be navigated because at Aon they remain convinced on the property cat proposition, especially when the broker looks at its own global portfolio, which Marcell said, “is significant, and has a wonderful geographic spread.”
“The loss ratios in the last 10 years, on average, have performed actually pretty well and many of the layers that we have have been untouched by any kind of events,” he went on to explain.
Marcell then explained that because of the demand increase and potential for constrained supply, property catastrophe reinsurance could be an attractive proposition, for those best placed to write more of it.
“We think that, for those reinsurers that can navigate and manage a global property cat portfolio, there’s ample opportunity to make returns and to satisfy the client needs which are growing and in the end, you know, reinsurers as a business need to maintain their relevance to our clients,” he said.
This reads-across positively to the insurance-linked securities (ILS) market, of course, with its focus being largely on property catastrophe risks still.
This is the opportunity for year-end for the ILS market, to step-up and position itself as a relevant and capable supplier of property reinsurance and retrocession capital, as well as solutions such as catastrophe bonds, at a time when traditional reinsurers may be shying away from the cat risk space.