Monte Carlo – September 13, 2004 – Buyers of reinsurance listed price as their main concern when renegotiating their reinsurance contracts for the 2005 renewals, according to Aon’s latest survey (Reinsurance – the Divided Market: How Far, How fast?), replacing security, which was listed as the main concern in 2003.

The survey also found that the entry of new, middle market reinsurers was expected to provide significant capacity, although this was likely to have only a moderate impact and 90% of buyers thought that the traditional European reinsurers would maintain market share. The survey, which is based on the findings from 50 reinsurers and insurers, also found that buyers:

• Agree that underwriters have become more disciplined, though not enough to prevent further market softening;
• Believe that reinsurers are charging enough to achieve adequate returns.

While sellers:

• Have mixed views over the direction of liability prices;
• Have declared a willingness to accept lower prices until technical pricing levels are breached;
• Believe that a more familiar soft market cycle lies ahead.

Commenting on the survey, Clement Booth, Chairman and Chief Executive Officer at Aon Re International, said: “It is quite evident from our survey that the majority of buyers and sellers (97%) expect to see premium rate reductions in 2005, although we expect several factors, such as the trend for technical underwriting and reserving issues, to mitigate the fall. As ever, it will be the balance between market share and profit that will dictate the eventual level of pricing.

“Despite the influx of new capital and the entrance of a new band of middle market reinsurers, most of our survey respondents expect the market share of the ‘old guard’ reinsurers in Europe to hold steady,” added Booth.

Turning to the recent hurricane activity in North America, Booth said: “After the fairly low incidence of natural disasters in recent years, the market has twice within a very short period been reminded of the potential for storm losses. Whether or not Charley, Frances or Ivan change the expectations of buyers or prices of the sellers remains to be seen, but these were nonetheless significant events.”
 

Notes to Editors

About Aon
Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company employs approximately 52,000 professionals in its 600 offices in more than 120 countries.  Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results, depending on a variety of factors.  Potential factors that could impact results include the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, resolution of regulatory issues, including those related to compensation arrangements with underwriters, pension funding, ultimate paid claims may be different from actuarial estimates and actuarial estimates may change over time, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs of resolution of contingent liabilities and other loss contingencies, and the heightened level of potential errors and omissions liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer reserves are under pressure.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.