Marcell d’Aon highlights the problem of the lack of reinsurance renewal quotes

Andy Marcell, CEO of Aon’s Reinsurance Solutions, pointed to the slow and delayed start of reinsurance renewals and implied that the lack of rating activity has become an issue, calling on reinsurance markets to “steer” towards the risk during this renewal, and not far from this.

Clearly, the progress of reinsurance renewals is seen as problematic by the brokerage giant, as Aon relies on its CEO’s network to communicate the need for reinsurance markets to meet customer needs.

Andy Marcell highlights the importance of reinsurance in society and the challenges the sector has recently faced, in a blog post published today on Linkedin.

But these challenges have significant ramifications for broker-dealer customers when it comes to having certainty about their capital arrangements for 2023.

“They now need their reinsurance partners to provide quotes to close deals,” Marcell says of Aon’s clients.

Clients need “their capital providers to provide them with a level of certainty in an uncertain environment,” Marcell said in this market dynamic.

They are looking to lock in coverage, to allow them to “move confidently into 2023”, but Aon customers also need “sufficient governance time for quotes to be reviewed and accepted”.

This is where the current stalemate, in terms of slow quotes and no firm terms of order (FOT) agreed upon for renewals, becomes detrimental to this planning, Marcell believes.

He said some reinsurers are “demonstrating an understanding of customer needs and a longer-term commitment to delivering sustainable solutions in a consistent and thoughtful manner” with these reinsurance markets “becoming more successful”.

Additionally, Marcell writes that Aon’s Reinsurance Solutions division is already seeing that some markets are “raising capital in order to seize opportunities in the current environment.”

“We believe the renewal period is a time to move towards, not risk, and those who do will be rewarded for their efforts,” Marcell said.

Adding that, “In this business relationship, anyone who takes the lead will be remembered and appreciated as a true partner. This industry was built on sharing risk and reward, and if we work together, that will continue to be the case.

While warning that “unless the cogs of the re/insurance engine are lubricated by a steady flow of capital, the machine stops and hampers the productivity of the global economy.”

So far, January 2023 renewals are near stalemate, with many proposed programs pushed back for repricing and restructuring, leading to significant uncertainty for ceding companies as reinsurance and ILS markets continue to hold. good in terms of price and conditions.

As we explained in an article earlier todaythere are examples where significant increases in risk-adjusted rates are proving insufficient for the reinsurance and ILS markets, forcing brokers and their clients to look back at the drawing board to examine how investments can be adjusted to better meet the now higher return demands of the market.

This is an issue that could lead to a very late renewal this time around.

The mismatch of client ambitions with the risk appetites and return requirements of the reinsurance market is a feature of a manual and often laborious reinsurance renewal process.

This is not so much a design feature as a feature that the reinsurance market has favored as it has evolved.

But this characteristic only really becomes evident enough for the CEO of a major reinsurance broker to comment on it, when the market is dislocated and exceptionally under pressure, as we see today.

This underscores the need for greater efficiency and increased use of technology in the reinsurance renewal process, particularly with regard to how reinsurance markets can express a genuine appetite for the risk and return that their capital demands, in a more dynamic way.

A dynamic that should also allow cedants to have real-time feedback, so that they can react and adjust their ambitions accordingly and get closer to an agreement.

In the current structure of the reinsurance market, this still tends to be a largely email-driven process, which can be far from dynamic.

Smoothing the process of matching risk to capital, while allowing capital to express its true demands for return, can eliminate many of these weak points. Especially during renewal seasons, when so many programs hit the market at the same time.

It is sometimes a mystery that the market works, given how set in stone it can be, when it comes to how the end chain process of receiving quotes and offers is undertaken.

However, if the markets don’t want to quote, since they demand a certain level of return to deploy their capital and don’t see the opportunity to achieve that in what they are presented, you can’t really blame them for not putting their best feet forward. Can you?

But the goal of meeting somewhere in the middle could perhaps be more easily and easily achieved for all parties, if the reinsurance renewal placement process were modernized and some of the existing technological opportunities embraced, which can really allow sellers and capital to come together during the important negotiation process.

The majority market really wants to take the risk. But perhaps he needs to go further towards efficiency to achieve this.

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