Interview: Aon’s Reinsurance Solutions
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Wednesday October 31 2018 SIRC Today Day 2
final report due in February 2019.
The final report will impact the regulatory
agenda, and at this stage the Royal
Commission has indicated application and
enforcement should be increased, rather than
there be substantive changes to regulation.
LU: Mainland China and Hong Kong are
both upgrading their solvency regimes.
China expects to accomplish its C-ROSS
Phase II project by mid-2020. Hong Kong
will implement the new three-pillar solvency
regime by 2021.
Second, IFRS 17 will be implemented in
Hong Kong in 2021, impacting local insurers
as well as China insurers listed in Hong Kong.
All these changes might have an impact on
the reinsurance demand.
Finally, the Chinese government is
loosening its criteria of foreign insurers
setting up in China. Qualified Hong Kong
reinsurers receive favourable treatment under
C-ROSS, so will the supply of reinsurance
change as a result? We’ll see.
ATTARD: De-tariffication, which is leading
to increased competitive pressures and
requirements to differentiate products and
services; strengthened regulation, such
as RBC2, increasing minimum capital
requirements; IFRS17 compliance; and the
ASEAN Economic Community encouraging
increased cross-border trade and cooperation.
Other examples are impacting specific
lines of business, eg agriculture—in India,
new PMFBY operational guidelines were
introduced on October 1.
How are the needs of your clients
DE SOUZA: Increased complexity is an oftencited
phrase when we talk about change in our
business—and it is true. Insurers in today’s
economic environment have a greater and
more complex role to play with customers,
industry, society, shareholders and regulators
as increasingly active stakeholders. There is
much more to the industry than correctly
pricing for insurance risk exposure.
This change has led to an increasingly diverse
range of skills and experiences being sought by
insurers beyond the traditional industry and
has created its own additional challenges.
MOORE: Clients’ needs continually evolve
driven by normal business factors such as
regulation, globalisation, a need for product
and distribution innovation to meet their
own customer needs, and investor tolerances.
ATTARD: Given regulatory changes—
reinsurance is increasingly being seen as
an accretive form of capital; direct pricing
is putting pressure on expense, therefore
optimising reinsurance structure/costs;
plus there is an increasing growth and
LU: Reinsurance demand from most clients
has evolved from a capacity play to a more
comprehensive partnership with brokers and
reinsurers who can support with product
knowledge and underwriting expertise.
They can help develop complex structures
to deal with solvency, volatility or other
specific concerns. Reinsurance needs have
become more and more differentiated; from a
market sizing perspective, motor reinsurance
will continue to reduce while speciality quota
shares keep increasing.
What will be the main talking points
LU: Insurers and reinsurers will be interested
in what the other side is doing to target top
line/bottom line jointly; market activities
including M&A; the Lloyd’s budget review;
personnel movements and their impact to the
Typhoon Mangkhut doesn’t seem to be
a very significant event but there’ll be a lot
of questions about its impact on specific
programmes. Finally, premium settlement
with certain Chinese cedants remains an issue.
MOORE: We expect discussions to be
centred on the recent loss activity from the
typhoon season, the expected impact on their
reinsurance partners and the general market
environment for forthcoming renewals.
ATTARD: The reinsurance market outlook:
pricing, capacity, demand changes, impact
of recent events, modelling implications;
industry M&A activity; growth initiatives;
driving profitable growth; and closing the
DE SOUZA: For Pacific clients it will continue to
be a means to maintain or establish partnerships
built on understanding and transparency with
their reinsurers. They will want to provide
updates on the Pacific market conditions
but also understand reinsurers’ approach to
managing volatility, pricing and the capacity
they can provide on a consistent basis over time.
Most of our market relationships are
stable over a period and the ever-present focus
on counterparty security remains. l
demand from most
clients has evolved from a
capacity play to a more