As the global re/insurance industry turns its focus on Asia at SIRC 2023, Aon’s Reinsurance Solutions specialty leaders for Asia-Pacific discuss the biggest challenges facing their clients, and how the firm is shaping better decisions for renewals success.

Grant Hollyman: casualty

Casualty business in the Asia-Pacific region has, in the main, continued to provide a profitable and efficient use of capital for reinsurers, particularly when contrasted to losses in the property market, which has been reflected in availability of capacity.

The key measure to success is around the clear articulation by clients about their exposures and original rate increases, coupled with underwriting discipline on rate adequacy and a measured, long-term approach from reinsurers. These factors have led to sensible outcomes through recent renewals.

While certain “emerging” risks such as PFAS have been high on the radar in the US, and are beginning to be reviewed locally, the expectation is that reinsurers should continue to appropriately assess the exposure for each client, and respond accordingly.

Geoff Lambrou: facultative

Our facultative clients through the renewal processes are facing both continuing and some new challenges. Trying to understand the market capacity on renewal, when internal treaty arrangements are not finalised, can create uncertainty depending on the facultative renewal timing.

Also, related to natural catastrophe risk transfer, waiting for the storm seasons to end so we can understand the broader impact of the global loss effect on the market in Asia-Pacific is very important. We are seeing a growing focus and concern around ESG metrics and the perceptions on facultative risks to market. This we expect to deepen as a key consideration where we would expect client success depending on their ESG position.

The facultative market does now feel more orderly, and the environment is showing signs of positive change. This may be due to further capacity entering the marketplace in Asia-Pacific, and positive results combined with firmer growth aspirations in the region.

Other areas of renewal conversation around the quality of risk management, prior claims record and the adequacy of valuations and limits purchased all remain key, for better decisions to be made.

Soeren Soltysiak: property

We expect this coming renewal to be substantially more orderly than the challenging discussions we saw last year. The significant changes in rates and deductible levels during 2023 represented a market reset, and now form the basis for any future discussions.

Even though capacity is slowly returning to the market, reinsurers are still cautious about where and how much to deploy. Open communication and early engagement are key. For cedants it is important to clearly articulate portfolio changes and underwriting approach, and for reinsurers to flag risk appetite and market expectations early.

We are supporting our clients by fully utilising our global reach to broaden the carrier pool, considering alternative types of capital and through utilisation of innovative capacity solutions.

Our data-led approach to deriving the most optimal reinsurance structure, coupled with a tailored view of risk, ensures the best possible outcome for our cedants.

Danny Alexander: life & health

The direct impact of COVID-19 is now mostly behind us, but there remain several major headwinds for re/insurers, and the life, accident and health segment is not immune.

The emerging impact on people’s health from long COVID continues to be a threat to underwriting practice and product design. The reinsurance market has sustained substantial losses in 2022/23, particularly from excess mortality in the US, and COVID-19 hospitalisation in Asia, and this has prompted reinsurers to better understand correlation of risk across perils, markets and segments.

The heightened geopolitical risk and outbreak of war has directly impacted our region, increasing the perceived value, and inherent risk, of personal accident and travel products, as well as life & health products more generally. Many re/insurers are honing their passive and active war policy wordings, to ensure wording meets intent. We are encouraged that most reinsurers are leaning-in during these times with suitable solutions, albeit at a risk-adjusted price.

High inflationary pressures, together with monetary tightening, has fuelled financial markets volatility. We see increased activity in reassessment of risk appetite, capital management plans, and a desire to improve understanding of the risk and volatility inherent in the balance sheet. The opportunity for utilising reinsurance solutions to manage risk at the balance sheet level is gaining much attention.

Overall, insurance fundamentals remain sound, and life, accident & health business presents an attractive diversification solution and growth opportunity for reinsurers.

Ai Ping Chan: marine

The marine industry will continue to face challenges from managing marine-related exposures to increased geopolitical tensions globally, and in managing increasing reinsurance costs while most domestic markets continue to be competitive.

While trading volume increased post-COVID-19, as compared to the pandemic years, the effect is now stabilising and most marine insurers face pressures to find new ways to grow while having to manage new exposures and capacity requirements from clean energy initiatives, for example, the new risks from the increasing shipments of electric vehicles, and the construction and operation of offshore windfarms.

The keys to success for the coming marine treaty renewal are for cedants to focus on prudent underwriting, to provide a clear narrative on how exposures are managed, where necessary, with explanations on marine underwriting guideline changes if any, and to convey how they will manage the competitive marketplace with a clear business plan.

We can assist our marine reinsurance clients in navigating the challenging marine market environment by utilising our position as a global broker to provide advice on managing reinsurance costs with optimal marine reinsurance structures, to support their marine business and any future growth.

Tom Drake: retrocession

In 2023 there were reduced retrocession purchases due to dramatically increased retentions, increased co-insurance and restricted perils and country scope—not to mention cost considerations. Few regional retro programmes were renewed without differences in conditions.

However, we witnessed increased demand for new regional Asia-Pacific buy-down covers prompted by territorial restrictions, and increasing attachments at group purchase level. New capacity became available from Bermuda markets for Asia-Pacific buy-downs, especially where Japan and/or Australia/New Zealand was excluded.

For 2024, we expect a more orderly renewal with no major changes in buying strategy. Focus will be upon consistency, coverage, contract certainty and level reset, with pricing discussions concentrating on underlying portfolio movements.

Successful placement execution will undoubtedly favour those clients that come to market early, and are able to articulate both in-force remediation and prospective portfolio outlook.

To find out more contact:

Grant Hollyman: [email protected]

Geoffrey Lambrou: [email protected]

Soeren Soltysiak: [email protected]

Danny Alexander: [email protected]

Wen Chen: [email protected]

Ai Ping Chan: [email protected]

Tom Drake: [email protected]