We’ll be pushing for reductions in rates where we see competition: Aon’s Marcel

Aon’s Reinsurance Solutions team intends to push reinsurers and ILS funds for rate reductions, in areas of the market where real competition is seen, with the higher-layers of towers likely to receive the most focus for price improvements for clients at the January 2024 renewals.

This is according to Aon’s CEO of Risk Capital, Andy Marcell, who speaking at a briefing just prior to this year’s Monte Carlo Rendez-vous event, warned markets that the broker will be focused on getting better pricing and a smoother renewal outcome for its clients this year.

Marcel said that, “We are hoping that the reinsurance relationships that were severely tested between clients and reinsurers at the 1st of January, to a degree, can be rebuilt and re-established during the coming year.

“The clients are looking for stability, closer reinsurance relationships as we walk into 2024 and to sort of rebuild, a stable relationship in terms of capital management, with their reinsurance partners.

“That is something that they are uniquely focused on and of course, they’re very, very interested to see how the reinsurers will react, to the renewal coming up at the 1st of January.”

He also explained that the market has become more competitive, especially at higher-layers.

This could, in part be driven by the catastrophe bond market’s influx of capital to higher reinsurance layers through the second-quarter of the year, we’d imagine, as well as recovering appetites of certain reinsurers for higher-layer cat risk.

“Quite a lot of competition at the top-end of programmes has started to occur since June 1st. So we anticipate that continuing,” Marcell said.

Explaining, “There’s always outliers, in a marketplace, we speak generally about risk. So we expect and we’ll be pushing for reductions in rates in most places where we see competition, that we see there’s more than adequate pricing adequacy.

“And at the top end of programmes, like I said, there is a lot of competition for that risk.”

He went on to note that this won’t be the case every where in the reinsurance tower at the 1/1 renewals though.

As, “On the other hand, there are places in the world that have had losses, and we’ll wait to see how the market reacts to the Turkish quakes, Italian floods and some of the losses in the Nordics. But in the main, a lot of the volatility and the losses that have occurred, have been at the lower-end of programmes where the global insurers for example, have managed that in their own ways. We expect to see some private placements to help manage that volatility.”

But he also noted that there could be some increased appetite, with aggregates insinuated, as Marcell expects there will be insurers that are looking for, “ways to get more frequency cover, to the extent possible at affordable prices and I expect that to be an ongoing discussion through 2024.”

Summing up the Aon Reinsurance Solutions approach to the road to year-end renewals, Marcell said, “This is not a call to action in the same way, but it is a, sort of, flag in the sand, that we are going to work incredibly diligently on behalf of our customers to make sure that the pricing levels are suitable and sustainable, for the future.

“So that’s going to be the debate, particularly at the higher end of programmes.”

With further inflows of capital expected into the catastrophe bond and ILS market, the competition for those higher layers of catastrophe reinsurance programmes could get quite elevated, perhaps driving better execution for ceding companies, while perhaps also driving a modicum of additional softening too.