Aon’s Marcell: Reinsurance capital growing but investor caution remains

Andy Marcell, CEO of Aon’s Risk Capital and Reinsurance Solutions segments provides an overview of current market dynamics.

How have market dynamics evolved over the past 12 months?

There is significant and growing capital in the reinsurance industry. Structural changes, such as adjustments to attachment points and movement away from aggregate covers and secondary perils, have led to increased competition and price pressure in the tail risk of property programs. As a result, we saw market pricing ease as the year progressed.

At the same time, market capacity for catastrophe bonds was tight at the end of 2022. However, it expanded during 2023, with clients seeking to diversify their partners in the tail risk. We then saw record cat bond issuance in 2024 and while we continue to expect continued growth in this sector, the expected severe windstorm season means that investment funds may take a pause before they recommit capital.

Despite these positive trends, there is still the potential for volatility and a major loss could renew pressure for increased rates and retentions. Investors are focused on whether the industry can model and predict emerging risks in a meaningful way – each year, our capacity to forecast risk improves, but investors remain slightly cautious. Sectors such as transportation, logistics, marine and aviation face upward pressure on rates due to recent losses, including the Baltimore bridge collapse.

Cyber risk is another significant area of focus. Despite downward pressure on rates, events such as the CrowdStrike outage reinforce the belief that the tail risk is systemic. Reinsurers have leaned into cyber, leading to product innovations such as cyber catastrophe bonds to help insurers achieve tail protection.

Are there any other underlying themes you expect to influence discussions at APCIA this year?

The impact of Hurricane Helene will undoubtedly be a major talking point, and we would also expect to see conversations around litigation financing cover, where, in the US, nuclear verdicts have led to exponential growth in related insurance costs, harming US business competitiveness and consumers. As a result of this situation, Aon has decided not to accept engagements to serve as a broker for litigation insurance transactions insuring US litigation finance businesses. We believe that this decision will help contribute to a more sustainable marketplace for all stakeholders.

What are some areas of innovation that have helped clients’ strategic goals?

We’ve completed a record number of parametric covers for our corporate clients in 2024 and we’re investing more in that space. These solutions converge traditional products with new skills and approaches, in response to demand driven by supply chain disruption, cyber threats and changes in workforce footprints.

What is Aon’s strategic focus for reinsurance in 2025?

Our focus is on bringing a broader set of solutions to our clients, equipping them with data and providing comprehensive consulting capabilities – whether that’s traditional consulting or software-powered.

We’re also expanding our insurance vertical to address both their risk capital and human capital needs, and broadening what we do as a firm to create better reinsurance relationships and client connectivity overall.

Finally, we’re doubling down on our analytics capabilities, which is where Aon shines. Whether that’s our Impact Forecasting catastrophe models, our proprietary casualty models or our collaborations with external expertise such as Praedicat and academia, we’re investing significantly in a wide range of solutions and capabilities whose predictive insights bring clarity and confidence to clients and, ultimately, allow them to shape better business decisions.

Is there a framework for how clients can achieve profitable growth?

It varies from company to company, but at its core, successful insurers adapt with technology to understand and access their data in usable formats. We can talk chapter and verse about areas such as product diversification and distribution, but the framework for growth is fundamentally about understanding data – understanding how to take insights from data and apply them in usable ways, to identify products, geographies and markets that offer profitable growth opportunities.