An analytical advantage

Brokers are increasingly moving away from a purely transactional focus, today delivering powerful analytics and advisory capabilities to their clients. Few are able to bring as significant firepower to bear as Aon Benfield, with its $120 million annual investment in data and analytics.

Talking with Paul Markey, chairman of Aon Group (Bermuda), it is clear that he is proud of the technical capabilities at Aon Benfield. “It is our technical and analytical capabilities that really set us apart,” he said, in what Markey agrees is a “highly competitive broking field”.

But as he explained, Aon Benfield acts not simply as a broker, but as an adviser, “bringing a whole range of skill sets to clients that enable them to materially strengthen their businesses”. Markey said that Aon Benfield is able to deliver on client expectations because “our knowledge of the products, and likely expected losses and outcomes are baked into our capabilities”. These capabilities are generally regarded as being second to none.

It is this deep understanding of the market, coupled with a serious and proactive approach to contributing to knowledge and understanding, that is reflected in Aon Benfield’s leadership position within the market, he said. And as Markey made clear, it is the company’s intention to “ensure its capabilities are further and further ahead of the rest of the field”, by uniting the full resources of Aon Benfield and the wider Aon group.

Efficient capital

Convergence capital is flavouring many re/insurance conversations at present, but Markey said that such capital flows were “not new for us, even if the scale is”. He said that Aon Benfield had pioneered the use of contingent capital almost 20 years ago and regarded its increasing deployment as reflecting greater “efficiency” in the market, although he agreed that the market was entering a “next and more profound phase” of third party capital development.

Markey said the impact of this influx of capital was positive for Aon Benfield’s clients. “Whether they use third party capital or not, it will likely make the renewals more efficient for insurers.” He said that many may well renew with exactly the same panel as they had done in previous years, but it was apparent that contingent capital had increased their range of options and made reinsurance buying more attractive in certain areas of the market.

Insurers are currently enjoying what Markey described as a “buyer’s market”, with primary players considering reinsurance both to strengthen their security and to make short-term opportunistic buys. He said that insurers have been able to explore options to upgrade the security of their reinsurance panel in the current environment, with some increasing their focus on collateralised options for their reinsurance programmes.

Markey said that insurers are also exploring opportunities to buy capacity such as aggregate covers that enable them to “write business in growth mode”. Such capacity was often short-term in nature, with no extended commitment from reinsurers, but both parties could benefit from such immediate opportunities.

New risks; new opportunities

Aon Benfield is also playing a leading role in helping insurers and reinsurers assume new and existing risks that have traditionally been outside the re/insurance space. Markey said that Aon Benfield—as part of the wider Aon group—is gathering and interpreting vast amounts of global data to enable the industry to better understand and take on global risks, both existing and emerging.

Markey was clear however that insurers and reinsurers will need to work together to take on risks in areas such as the energy sector or where state-backed entities predominate. He was confident that in partnership there is considerable opportunity for growth. “Reinsurance will undoubtedly play a role in assuming these new risks. Players don’t like to take bold new steps on a totally net basis. Development will necessarily need to be synchronised as the industry assumes new risk.”

Markey said that convergence capital has a role to play in developing these new risk opportunities, with a marriage of re/insurance and capital markets’ interest a “perfect world scenario” in bringing such risks to market. There is the potential to bring billions of dollars of additional risk into the market that has previously been too difficult to digest, with capital markets’ interest presenting the opportunity to create viable solutions to sizable global risks.

Markey concluded that Aon Benfield will continue to work with its clients in providing solutions to their risk needs, acting as “accomplished advisers that will continue to deliver value to our clients”. He highlighted that Aon Benfield was actively seeking and participating in growth initiatives and would continue to lead and strengthen the global broking environment.