Aon’s portfolio broking & facilities business open to ILS markets

Aon’s newly formed Global Portfolio Broking team, part of the Aon Reinsurance Solutions business, will look to the capital markets and ILS funds as sources of capacity where appropriate for backing facilities business and portfolios of risks.

Andrew Matson has been named as the leader of Aon’s newly formed Global Portfolio Broking team and will be tasked with building on the success of established facilities, while also developing new facilities in line with market demand for global reinsurance risk.

Specifically, Matson and his team will match cedents looking for either additional or specialist reinsurance capacity with risk carriers that have a strategic appetite to diversify their portfolios and gain access to non-correlating risks, the company said.

Part of that remit will involve a capital agnostic approach to selecting the most suitable and cost-effective markets to back a portfolio or facility, which of course includes the capital markets and ILS funds.

Matson told Artemis, “Clients are demanding more innovative solutions and portfolios allow us to consider the sources of capital appropriate for the risk base. Alternative sources including ILS markets are very much in scope when selecting markets to support our products.”

Aon has had success with its facilities such as: Marlin, a facultative reinsurance facility that offers international capacity to Latin America-based cedents; Landmark, providing EMEA cedents with access to global risk capital; and Pegasus, a diversified professional indemnity portfolio for Aon’s UK retail business.

All three of these facilities have reliable capacity available for Aon’s clients, while offering a cost-effective way to access the risk for re/insurers and markets that back them.

Karl Hennessy, CEO of Aon’s Carrier Solutions group, commented, “‘We have enjoyed considerable success pioneering portfolio solutions on behalf of clients and carriers in recent years and Andrew’s appointment reflects both the strong demand and importance that this area of our business commands.”

Matson will report to Reinsurance Solutions’ UK CEO Nick Frankland in the role and the new Global Portfolio Broking team will be tasked with providing insights into the risk appetite and preferences of carriers, consulting on design of treaty structures, and providing access to diverse sources of risk capital, including ILS capacity.

Nick Frankland said, “Re/insurer distribution channels and the traditional value chain are becoming increasingly disrupted, and clients are demanding access to a wider range of risk and capital. The Global Portfolio Broking team has positioned itself to create multi-class, geographically diverse re/insurance solutions that create opportunities across Aon’s client base. These opportunities can serve to bolster existing capital availability, market relationships and income streams, or provide entirely new opportunities for growth, depending on individual risk appetite. In this way, Global Portfolio Broking is helping to create more robust organisations through optimising capital opportunities for Reinsurance Solutions’ clients’ books of business.”

Facilities offer an interesting way for ILS funds to access a ready-made portfolio of risks, which for major asset managers could be an attractive way to add diversity to their portfolios. Or for managers looking to provide a spread of the reinsurance market’s return, such as Stone Ridge, a way to do this while expanding into new risk classes.

As such the appetite of ILS funds to become capacity providers to some facilities is likely to increase, as the appetite of end-investors for diversifying sources of risk continues to grow.