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Monte Carlo 2022

Q&A: Dominic Christian, global chairman of reinsurance solutions, Aon

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The Monte Carlo Rendez-Vous has returned to an in-person event after a two-year absence. Did the hiatus have any positive effects?

Virtually overnight, the pandemic completely transformed the way our industry operated. In the early days of lockdowns, I think we all questioned whether we as individuals, and as an industry, would be able to transact business as robustly without the face-to-face contact to which we had become accustomed, and which, for hundreds of years, had defined the way we worked – certainly in the London market.

Looking back, we can see that the period of absence from the office had the positive effect of accelerating the path we were always destined to tread – that of being able to operate digitally and remotely – but it is still amazing to consider how we mobilised our resources and transformed our operations in just a few weeks. Now, I think we have reached a position where we can optimise the use of our time through a blend of remote working and transacting, and face-to-face discussions.

The time spent not being able to meet at events such as the Rendez-Vous has made us appreciate, value, and hopefully maximise the time we are now able to spend together in person, and so I, like the many other delegates, am really excited about this year’s event, which, incidentally, comes during a period when it is more vital than ever for us to get together and discuss challenges.

Interestingly, this year’s Rendez-Vous discussions may not centre around cat losses, growth and opportunities, but more about maximising relationships, maintaining business resilience, and navigating potential volatility. The current macroeconomic conditions are challenging, potentially game-changing, and are affecting us all. We need to make sure we unite in being able to provide tools and solutions to get through this period of uncertainty, in order that our clients’ businesses remain robust.

What themes will be reflected in this year’s event?

Capacity. Climate change. Volatility. Of these, capacity will be the biggest discussion point. According to our most recent analysis, global reinsurer capital had reduced by around 11% to $600bn, and we saw at the mid-year renewals how challenging it had become for cedents to place certain business with their reinsurance partners. This trend may also be seen at the January 1 renewals, but we are confident that we will be in the best position to place client programmes and achieve successful outcomes. The problem is easily defined, and those with access to the broadest range of capital solutions – and the ability to blend those solutions – will be the ones best able to serve their clients.

The renewals will be also focused on client differentiation: using advanced data, analytics, and modelling to help clients generate their own unique view of risk, which can then be taken to capital providers to create a compelling case for risk transfer.

As you will hear us say during the Rendez-Vous, reinsurers with a balanced, considered portfolio can still make very good returns, even when writing the more challenging areas of property cat business.

What are the biggest challenges facing the reinsurance industry in 2022?

Interest rate rises in the long-term should be a positive for re/insurers. In the short term, we obviously have the issue of inflation, which does have the potential to create challenges both on the primary and reinsurance sides of the business.

Re/insurers are wary about being caught off-guard; in the current environment, inflation is so pervasive, volatile, and fast-moving, that it can be very difficult to track exposures across complex, global portfolios. At the January renewals, reinsurers will be looking at insurers’ strategies for managing inflation as part of their risk assessment and risk pricing, and so this is an area in which we are spending a lot of time helping our clients navigate potential volatility.

Climate change is one of the biggest risks facing the industry. What impact will this have in terms of future profitability?

Climate change is indeed a huge risk for us all, but as an industry we should be looking at the opportunities as well as the challenges. Re/insurers are in the business of risk-taking, which means that we should always be focused on developing the best ways to identify and assess risk in order that it can then be priced appropriately. If risk is priced appropriately, then re/insurers can make positive returns.

In terms of climate change, the risk assessment is getting better and better. Aon’s own approach is to develop a wide range of academic collaborations in order that we can build increasingly robust climate change considerations into our global catastrophe modelling suite. In this regard, we are working with leading academic institutions such as Karlsruhe Institute of Technology, Columbia University, and the University of California-Merced & Los Angeles, to bring the latest peer reviewed science into our models across multiple perils and geographies. This enables us to offer clients risk analyses based on the very latest climate data, thereby enabling them to make better business decisions through the more accurate pricing of risk.

This level of insight and functionality will rightly become expected by our clients.

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