Cedants extracting increased value from the reinsurance product: Aon

Cedants are moving beyond extracting savings from reinsurance and reassessing programme design, facultative capacity and alternative capital with future growth in mind, says Aon’s Tomáš Novotný.

Key points:
Cedants rethink programme relevance
Facilities turn fac into growth tool
Catastrophe bonds become competitive

For the first time in two years, balance sheet protection is moving higher up cedants’ agendas than simply trimming reinsurance spend and banking the savings, according to Aon’s Tomáš Novotný.

Novotný, CEO EMEA and chairman International at Aon’s Reinsurance Solutions, said the firm was working with clients to move beyond only savings and view reinsurance as strategic capital that could be aligned to business objectives as it approaches the January 2027 renewals.

“Rather than focus only on obtaining monetary savings from their reinsurance programmes, we are working with our insurer clients to extract maximum value from the reinsurance product and ensure that, for 2027, they are buying cover that is more relevant to their companies’ exposures and growth ambitions and better protects their balance sheets,” he told Baden-Baden Today.

Rethinking cover

Novotný noted that the discussion increasingly focused on the current too high attachment levels and aggregate solutions, as cedants reassessed where and how their risk transfer programmes would respond to various loss scenarios.

That shift is consistent with Aon’s latest Reinsurance Market Dynamics report, published in September: it estimates global reinsurance capital reached a record $800 billion at June 30, including $144.5 billion of third-party capital, and concludes that the focus ahead of 1/1 is moving towards flexible structuring and product expansion rather than price alone.

That change marks a break from the previous two renewals, when buyers focused mostly on price and extract savings.

Novotný said reinsurers also appeared receptive to the shift, with discussions at the Monte Carlo Rendez-Vous in September suggesting recognition that products needed to become more relevant to buyers’ objectives once again.

Novotný sees a similar shift in facultative reinsurance, with cedants increasingly using fac to support future underwriting rather than simply removing individual risks already sitting on their books.

Buyers want cover that fits their exposures and growth ambitions, and better protects their balance sheets”.

Fac for growth

“Rather than de-risking case-by-case with spot facultative reinsurance purchases, cedants are using fac to support their profitable growth,” he said.

The increasing use of facilities means cedants can plan facultative capacity around the business they intend to write rather than making a separate placement decision whenever a risk arises. Novotný described the approach as “more strategic and forward-thinking”.

Catastrophe bonds are also becoming a more significant part of the mix. Issuance covering European interests has risen over the past three to four years, initially as buyers sought to diversify their sources of risk capital.

Aon’s September report points to the scale of that expansion: third-party capital reached $144.5 billion in the first half of 2026, while the cat bond market stood at $63.4 billion, up around 17% from the previous mid-year level. New cat bond issuance reached $17.3 billion in the first half, with investor demand supporting capacity across a broader range of perils and geographies.

With alternative capital pricing in EMEA now moving closer to traditional reinsurance, Novotný expects further growth. “I expect an increase in cat bonds in Europe in the short term,” he said.

Capital opportunity

At the same time, Novotný sees new areas of demand creating opportunities to put more insurance and reinsurance capital to work.

Globally, he highlighted the investment flowing into data centres as one of the biggest opportunities for profitable growth and portfolio diversification.

“It’s an absolutely massive opportunity across the world,” he said. “All these investments need to be backed by insurance and reinsurance protection, and a large amount of cross-sector capital is going to be needed to make that possible.”

The opportunity, of course, comes with a concentration challenge and the accumulation management is increasingly important if the market is to sustain capacity as the sector expands. In response, Aon recently launched its Digital Infrastructure Risk Aggregator (DIRA) tool to help clients track accumulations. 

In EMEA, Novotný sees the nat cat protection gap as the significant near-term opportunity, Aon’s analysis of EMEA natural catastrophe losses over the past 25 years points to a substantial gap between economic and insured losses across the region.

“Working on reducing the protection gap is not only a social mission for insurers and reinsurers, but also an enormous business opportunity in the short term,” he said.

Closing it effectively will require some degree of public sector involvement alongside private insurance capital, Novotný added.  

“To tackle the protection gap efficiently, we need a certain level of state support,” he said. “But, as we have seen in Europe recently, such support doesn’t need to be overly intrusive, and may not need to go much beyond introducing a certain level of compulsory insurance buying.”

Tomáš Novotný is CEO EMEA and chairman International at Aon’s Reinsurance Solutions. He can be reached at tomas.novotny@aon.com. 

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