Reinsurers must ‘step up’ as buyers seek more value: Aon

Buyers should use softer conditions to push for better products, structures and communication rather than simply lower prices, says Aon’s reinsurance broking chief.

Key points:
More innovation expected this year
Buyers seek value beyond price
Cedants rethink cover and structure

Reinsurers need to “step up” and deliver more value to buyers after several years of strong returns, according to Aon’s global chief broking officer for reinsurance, Anshuman Srivastava, as the market moves further in cedants’ favour.

Speaking to Monte Carlo Today, Srivastava said abundant capital and softer conditions were giving insurers room to rethink not only about price, but attachment points, coverage and their reinsurance buying strategies. Buyers are seeking value-driven products, with a shift towards enterprise-level buying and cycle management.

“There’s an abundance of capital that’s out there. It doesn’t mean that price is going to sink to the floor.”

“Reinsurers are keen to engage. They would like to support our insurer clients’ growth and grow themselves,” he said. “They are aware that they’ve been returning 17% ROEs for the past few years, and that they need to step up and provide more value in the product they sell.”

That does not mean rates simply collapse, he cautioned. Instead, the softer market should create space for more structuring, innovation and discussion around what buyers actually need.

“There’s an abundance of capital that’s out there. It doesn’t mean that price is going to sink to the floor,” he said. “But what that does mean is that there are more conversations, more communication, and certainly more structuring and innovation as a result

For buyers, that may mean revisiting changes imposed during the harder market. Srivastava pointed to attachment points, which moved materially in 2023, and the scope of cover, which became more restrictive as reinsurers pushed for tighter terms.

He also expects larger buyers to take a broader view of their purchases. “You will probably see more enterprise-level buying as opposed to business unit-level buying,” he said, particularly where companies are managing larger and more complex risk positions across portfolios.

‘Not enough innovation’

The bigger question, however, is whether the products on offer improve enough to materially unlock more demand.

Srivastava said further growth would depend on whether sellers offered products that genuinely improved insurers’ capital and earnings positions.

“We have not seen enough innovation or change in the past year, at least, which we expected to come through this year,” he said.

That matters because, in his view, “demand has been and will continue to be driven by value” rather than the availability of capacity alone. A cheaper product that does not solve the buyer’s underlying problem will not necessarily lead to more risk or a sustainable purchase.

At this point in the cycle, he expects more reinsurance to be traded through a wider mix of structures, including proportional and non-proportional cover, while alternative capital becomes more deeply embedded in buyers’ options.

Aon no longer views alternative capital simply as a “substitute” for traditional reinsurance, he said, but as a “complement” that can increasingly support risk across the curve.

“The lines are fairly blurred” between capital-markets products and traditional reinsurance, Srivastava said, noting growing use of rated fronting and increasing investor interest in casualty and multi-line sidecars.

That evolution should encourage buyers to focus less on labels and more on which capital source and structure best solves the risk.

Communication beats price

For reinsurers trying to differentiate at 1/1, Srivastava was equally clear that price alone will not be enough.

Aon’s broker survey measures reinsurer performance across price, capacity, communication and whether a broker would recommend the carrier. According to Srivastava, its analysis found that pricing did not rank first.

“It was actually communication,” he said.

That matters particularly as the market softens. Reinsurers, he argued, need to articulate appetite clearly, explain changes in their view of risk, and make sure clients understand where they are willing to grow.

Long-term relationships will also matter. Srivastava said buyers retain a clear bias towards core reinsurers that have supported them over time, paid claims, remained flexible and worked through the cycle.

But he also encouraged buyers to keep challengers and newer capacity in the mix, both for competitive tension and for price and structure discovery.

The risk, he said, is allowing renewals to drift too late and turning the negotiation into a debate about price. Timing is key.

“Price should never be the basis of negotiations,” Srivastava said. “At the end of the day, the buyers always feel they’ve paid too much, and the reinsurer always feels that they’re getting too little. The price will be determined by the market.”

The opportunity at Monte Carlo, therefore, is to start those conversations earlier.

For Srivastava, the message to buyers is straightforward: use the leverage available in the market, renew core reinsurer relationships and improve the quality of protection rather than simply drive down price.

“Spend a little bit more time thinking through your buying strategies, the products that you’re buying,” he said. “Don’t just compare price but actually compare the value of products.”

Anshuman Srivastava is the reinsurance global chief broking officer at Aon. He can be reached at: anshuman.srivastava@aon.com

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