London February 23, 2004 Buyers of reinsurance have shown a new appetite for spreading their risk among a growing number of reinsurers, resulting in increased competition but not necessarily translating into the premium reductions that buyers wanted or expected. These factors, coupled with the reinsurers' continued demand for underwriting transparency and profit, have brought the reinsurance industry to a crossroads, concludes Aon's (the world's largest reinsurance broker) 2004 reinsurance renewals report.
The growing influence and the attraction to buyers of so called 'clean capital' reinsurers has been a factor in the pressure for downward movement of premium in some lines, signifying that the peak of the hard market has been left behind. Clean capital providers, while they have been aggressive, have also taken a measured approach tempered by strong underwriting discipline. In general, reinsurers continued to pursue underwriting profit although fierce competition led to some surrendering a proportion of their rates to defend market share.
The report also found;
- reinsurance premiums are likely to drift sideways or downwards over 2004 depending on the line of business; however
- we are unlikely to see a significant deterioration in prices, terms and conditions through to 2005;
- new, clean capital has made strong inroads into US catastrophe business and European business;
- reinsurers are at a crossroads at which they must decide how they will shape themselves to adapt to a rapidly changing market where an increasing number of reinsurers are equally acceptable to buyers.
Charlie Cantlay, Deputy Chairman of Aon Limited's Reinsurance division, commented: "The recent renewal season saw the market struggle to reconcile an over abundant supply of capacity with the need for reinsurers to maintain underwriting profit as they continue to build their reserves for the sins of the past. Everyone wanted a little satisfaction from the renewal of 2004, whether buyer or seller, but broadly speaking neither got exactly what they wanted."
"What has changed is that the buyers perception of the key value in the relationship with their reinsurer is now firmly focused on security ratings, risk diversification and exposure to US legacy risks," added Cantlay.
Aon Reinsurance Renewal Report and Outlook 2004
Note: Requires Adobe Acrobat Reader, available for free here
For further information, please contact:
Sebastian St. John-Clarke
Aon Press Office
0207 505 7201
Sebastian.Clarke@aon.co.uk
About Aon
Aon Corporation (www.aon.com) is one of the world's leading provider of risk management, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company has more than 600 offices and 55,000 professionals in 125 countries and sovereignties. Aon's global network, broad resources, industry knowledge and technical expertise helps leaders of businesses, associations, and public entities develop effective solutions to risks, issues and challenges, creating opportunities that generate efficiencies, improve profitability and build value.
Aon is an industry leader in a number of key areas including retail, reinsurance, wholesale and specialty insurance brokerage; captive management; human capital consulting; claims and loss cost management; and premium financing.
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, 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, 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, and the timing and resolution of related insurance and reinsurance issues relating to the events of September 11, 2001. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, are 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.
Access international media contacts, the full library of Aon media releases, and a media kit with fact sheet and executive bios, via links below.