Reinsurers show fac facility restraint on wildfire after losses

Reinsurers are showing increased restraint around wildfire peril in facultative facilities after the heavy losses recorded in California at the start of the year, according to Ryan Dabransky, Aon’s fac facilities leader, who said wildfire is the most affected area.

Key points:
Increased appetite for fac facilities
Reinsurers showing more restraint around wildfires
SCS less impacted by losses

Formed nine years ago with three people, Aon’s fac facility team, led by Dabransky for the past five years, now numbers 23 P&C brokers dedicated to facilities. Growth has been driven by client demand and added reinsurer support, with Scor and Ryan Re among new entrants from 1/1.

Dabransky said his team offers “a number of solutions and structures for different client needs”, but property placements typically exclude main storm, earthquake and high-hazard flood – making secondary perils central. “It’s covering wildfire, it’s covering severe convective storms (SCS), man-made fire and winter storm. There’s been a lot more focus around the secondary perils,” he said.

Facilities include a portion that allows client policies to be underwritten fully automatically, and a portion that gives the reinsurance capacity provider more oversight through an underwriting box.

“There is an underwriting box, and because of the secondary perils and how those have developed in losses, there’s a bit more restraint around the underwriting box,” he explained.

“Wildfire is a good example. In a lot of our deals, wildfire scoring will be a key component. Our underwriters have to really think about what tools the client is using, how they are underwriting wildfire, and right off the bat whether the reinsurer is going to be comfortable with that tool.” Policies can flow automatically if scores and tools meet thresholds; otherwise reinsurers review and reprice.

“SCS has always been a big component of what we do,” Dabransky said, noting that disciplined facility underwriting and strong client practices have limited losses in this space.

For more news from the American Property Casualty Insurance Association (APCIA), click here.

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