Differentiation key to maintaining relevance in softening fac reinsurance market

Nick Fraccalvieri, CEO of Aon’s EMEA facultative reinsurance business, shares his observations on what is driving facultative purchasing, the underlying market conditions and how Aon is remaining at the forefront of increased competition.

While demand for reinsurance remains strong, with an abundance of capacity available and softening rates, particularly in the EMEA region, the need to remain relevant is no longer enough – the pressure is on key market players to differentiate their services to actively compete.

How have Aon’s facultative capabilities developed since you joined in 2023?

In one word – significantly! There has been a clear focus on our digital and data strategy. We have a mass of data available to us and are now able to systematically capture even more advanced data sets. Most importantly, we can articulate it in a very consistent manner, which has enabled Reinsurance Solutions to create a suite of exclusive and proprietary facultative facilities which no other intermediary can replicate.

Our ability to leverage insights to better inform client purchasing, combined with our data and analytics capabilities, enables us to deliver clarity and confidence to our clients. We are really excited about the continued expansion of this strategy and how it will evolve and how we help clients to shape better business decisions and achieve profitable growth.

Aon has seen strong growth in this area over the past few years. How does it differentiate in this competitive marketplace?

The facultative market has seen significant growth in recent years and Aon has performed well by bringing a wealth of solutions to our clients. We anticipate this continuing as insurers seek to grow their top lines and cedants look to remove volatility from their portfolios and protect their balance sheets.

For us, the key to delivering optimal client solutions is understanding why the client wants to purchase facultative, truly understanding their needs and responding with the best of our capabilities.

The above is already an example of our approach to differentiation and one of our three core elements.

There are other elements I see as fundamental too. First, our market size – we are the largest broker in the space, which means we are able to innovate, negotiate and deliver insights like nobody else.

Second, Aon United. We can bring the power of Aon to our clients and respond holistically to multiple clients’ needs at once – for example, we can leverage a combination of risk transfer solutions to bring the optimal placement to clients and cedants alike.

Third, I refer back to our data and digital strategy. Facultative, being highly transactional, can be quite frictional; our investment in technology and usage of data will enable us, sooner rather than later, to be the first to transform our client experience.

This is going to take us a few years, but we are already on that path and have a clear vision as to how we're going to achieve it. It's a journey that will simplify the way the business is traded, removing barriers to facultative purchasing. Once the business trading environment is simplified, then, automatically, Aon clients will see the benefit and will want to trade more, utilising all the efficiencies we're able to create.

Across EMEA, what do you see as the biggest opportunities for facultative reinsurance? Is it helping to promote growth in certain business lines?

EMEA remains the biggest region for us and still presents significant opportunities. The demand continues to be very high as facultative is instrumental in helping ceding companies grow and expand their product offering without increasing the burden on capital requirements.

We continue to see growth across P&C but also across specialty lines, such as financial and professional lines and construction, as facultative offers a low-cost entry point to the market.

Every single insurance company has a target to grow, and facultative can help with the execution.

As a “pay-as-you-go” tool, facultative offers that ultimate flexibility and agility to insurers as they manage their business and their balance sheet and maintain their profitability.