Insurers face gaps in coverage: Aon
Insurers could face gaps in risk transfer programmes and be forced to retain more risk, particularly at lower layers, if they do not come to the 2023 renewal season very well prepared.
That is what Aon’s head of EMEA, Eduardo Dávila (pictured), told Intelligent Insurer, summarising a set of market conditions that could make it a tricky renewal for some.
“The reinsurance market is tightening, with some traditional reinsurers limiting or removing cover, collateralised capacity becoming less available, and catastrophe bond capital favouring repeat issuers,” he said.
Reinsurers are adjusting rates for inflation, trying to narrow terms and conditions, and taking a more cautious view of risk with “secondary perils”. Climate projections will further drive loss modelling estimates, and increase demand for capacity.”
Dávila said Aon is busy helping clients to implement measures necessary to achieve a successful renewal. He said one of the most important aspects of this will be preparation. As inflation puts pressure on consumers and prompts interest rate increases by central banks, that in turn leads to claims inflation and demand surge—two of the most difficult scenarios for re/insurers to manage.
This requires more attention on reserve adequacy and dynamic forecasting of the future environment. “The key is to be well prepared and be able to clearly articulate the way the inflation or indexation is reflected in the presented portfolio,” he said.
