INTERVIEW: KEVIN TRAETOW & STEPHEN HOFMANN, AON’S US REINSURANCE SOLUTIONS
Client differentiation vital at 1/1
With a ‘challenging’ renewal ahead, Aon’s message for clients is to start early, say Kevin Traetow and Stephen Hofmann of Aon’s US Reinsurance Solutions.
Helping clients differentiate themselves is a key component of Aon’s strategy as the company works towards a “challenging” January 1 renewal, according to Kevin Traetow and Stephen Hofmann, co-presidents for Aon’s US Reinsurance Solutions. APCIA Today spoke to them as they prepared for this year’s industry meeting in Dallas, Texas.
Speaking about recent dynamics in the market, Hofmann said that US insurance had experienced disruption in the property market even prior to Hurricane Ian making landfall, caused by concerns over the impact of inflation, climate change, model miss and uncertainty over secondary perils.
In addition, catastrophe loss volatility experienced by the property market has put an inordinate amount of scrutiny on the line of business. This is at a time when there is an increased demand by insurers for property reinsurance capacity, while reinsurers are repositioning their business due to their past performance, a difficult retrocessional market and reduced appetite by investors in the line of business.
According to Traetow, significant rate increases were ubiquitous at the mid-year renewals, with rises on top of how the clients’ exposures changed year over year. This is a trend he expects to see continue.
But, he added: “We want to take special care as we work with our clients on what their exposure really tells us. So risk-adjusted—what does it mean as they provide us with updated exposures, as well as considering other factors such as inflation?
“We work very hard with our clients to generate a comprehensive and realistic view of their risk.”
“We recognise that the portfolio that renews at 1/1 is different from the mid year.”
Stephen Hofmann
State of the market
Since the July 1 renewals, the co-presidents said that the team at Aon has been working closely with clients in preparation for their January 1 renewals. Discussions have covered risk appetite, clients’ view of risk, the impact of inflation on exposures, and underwriting actions.
Hofmann said: “We’ve spoken to these clients about the state of the market and the specific impact of macroeconomic conditions on their individual businesses. We recognise that the portfolio that renews at 1/1 is different from the mid-year, but there is no doubt that there will be a market impact, due to amount of capacity that’s been withdrawn by some of the key reinsurers and the macroeconomic conditions.
“That said, Kevin and I were both at the Monte Carlo Rendez-Vous and spent a lot of time with the top 25 global reinsurers. After those conversations we felt better because a number of reinsurers stated an appetite to grow given the current market. So now it’s just a matter of ‘at what price?’ and ‘how much?’.”
Traetow added that the matter of how much reinsurers can grow and whether that will address the needs of Aon’s clients is the reason it’s always important to look at alternative capacity as well as traditional insurance capacity. He said that Aon aims to provide the broadest access to all forms of alternative capital—whether that’s traditional reinsurance, collateralised reinsurance, insurance-linked securities, or other forms of capital.
“High quality data and submissions are always important.”
Kevin Traetow
Start early
With a widely acknowledged “challenging” 1/1 ahead, Aon’s message for clients is to be in the market early.
“We believe client differentiation will be important, and we have already been working extensively with clients on key areas of differentiation—on data, view of risk and how they are addressing inflation,” Traetow said.
“Anticipating reinsurer concerns is critical in securing the capacity at the best available terms and conditions for our clients.”
Aon is helping clients to demonstrate what the real risk is and then how to represent that to the reinsurers, which will ensure a better understanding of the client’s portfolio overall.
Parallel with this, inflation is discussed frequently to ensure a clear view of the client’s expectations. This includes how inflation is built into a client’s portfolio and into the data.
Hofmann agreed that such information is a “key component” for 1/1.
“We’ve been working to bring some of that forward in the data, and we’ve highlighted the underwriting actions clients have taken that will have an impact and differentiate them in the market,” he said.
High quality data and submissions are always important, added Traetow. “It’s even more important as we go into a challenging market,” he said. “We want to have clear advice from the clients as to what is represented in their portfolio and that its clearly articulated to reinsurers.
“Otherwise, reinsurers might make assumptions that are not in the best interests of the client.”
Kevin Traetow is a co-president at Aon’s US Reinsurance Solutions. He can be contacted at: kevin.traetow@aon.com
Stephen Hofmann is a co-president at Aon’s US Reinsurance Solutions. He can be contacted at: stephen.hofmann@aon.com
Main image: Shutterstock / SvetikovaV
