AON’s Andersen Sees Need For Adaptation

The property insurance market needs to adapt to a changing global environment, says Aon PLC President Eric Andersen. The rapidly increasing rates that have characterized the last few years should stabilize as insurers and reinsurers incorporate updated valuations into their underwriting and new capacity enters the market. Reinsurers have two main challenges, writing coverage for properties that were undervalued because of inflation and falling investment returns from their bond portfolios, and the huge claims they’ve paid due to climate change-related catastrophes like floods and wildfires. They have responded by increasing both deductibles and rates up to 100 percent. “They pushed the risk to the primary insurer, who is essentially pushing it to the primary buyer,” says Andersen. However, increased capital is entering the market. Everest Re Group Ltd has announced that it will raise $1.5 billion in new equity capital, and other reinsurers are expanding their capacity.