Public-private partnerships will increasingly be seen as the solution to growing frequency peril losses, a top analyst at Aon has said.
Mike Van Slooten, the broker’s head of market intelligence, said the reinsurance industry is not large enough to handle growing frequency losses including flood, wildfire and convective storm losses.
Retentions, which remained largely unchanged at January 1, have left much of this risk on the books of primary insurers, who have responded by increasing primary rates.
However, as the cost of insurance continues to increase, Van Slooten said collaboration between the public and private sector looks increasingly likely.
Discussing the January 1 reinsurance renewals on the Insurance Day Podcast, Van Slooten said: “It’s recognised that the reinsurance sector doesn’t have the financial resources to be able to deal with all these losses, it is always going to be a case of sharing it across the value chain.
“There will be ripple effects throughout the value chain and ultimately, people will start to take the view that you need public-private partnerships if you want to put structures or mechanisms in place that are there to pre-emptively deal with these losses [and] allow communities to put themselves back together again relatively quickly,” he continued.
Van Slooten said this was already beginning to happen, with regulators in Europe in the early stages of creating a pan-European natural catastrophe scheme.
“But it’s clear that the level of dialogue now between private industry and national, or even regional governments and regulators, is increasing because people are recognizing that [this level of loss] does now feel like the new normal,” he said.
Van Slooten also said he expected appetite for natural catastrophe reinsurance business to remain strong going into 2025.
In addition, casualty reinsurers would continue to be selective about US risks, while cyber reinsurers were still comfortable despite falling primary rates.
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