Aon’s Fiore and Superczynski: (Re)insurers must be flexible to attract capital
Renewed interest from US mutuals looking to Lloyd’s for diversification, the re-emergence of sidecars, buoyant cat bond issuance, a burgeoning surplus notes market and growing appetite for balance sheet relief from legacy and structured reinsurance deals are all signs of the pressure carriers are under to optimise capital structures at a time of market stress.
But they also demonstrate that there are different forms of capital available to (re)insurers that are prepared to be nimble despite challenging macroeconomic headwinds and continuing investor scepticism over property cat and the impact of climate change.
“There's a few different ways to think about optimisation,” Aon’s Kelly Superczynski told The Insurer TV.
“Making sure you have enough capital to meet your strategic needs is paramount and feels like a big issue at the moment, especially around multinationals and globals, so: ‘Where does my capital sit? Which domicile is it in? How do I use internal reinsurance vehicles? How can I use the different structures available, in order to optimise my capital?’
“It’s about helping clients create the kind of nimble framework that allows companies to move capital around quickly and efficiently, and making sure that if they need access to other forms of capital, we can help them look at what forms of capital are available today at the most efficient price,” the head of Aon’s Capital Advisory practice in the Americas added.
This is where the technology comes in, said Jim Fiore, CEO of Aon’s Strategy and Technology Group and Capital Advisory in Bermuda.
“A lot of people are familiar with ReMetrica, it's been around for a long time and a lot of companies are using it. Tyche is like ReMetrica on steroids, and so that's helping form those decisions,” he said.
Aon acquired software platform Tyche from technology and software firm RPC Tyche for an undisclosed sum in March last year. At the time, Aon said the transaction significantly expanded its existing capabilities to help (re)insurer clients “rethink access to capital and make better business decisions”.
Speaking on The Insurer TV’s Close Quarter programme, Fiore said: “I think clients should be very excited about where they could grow in the market with access to tech like Tyche which is a modelling tool that allows us to look at pricing, reserving capital optimisation and portfolio optimisations.
“We help our clients look at their portfolios and say, ‘are there areas you're too heavy in that you need to maybe reduce, and then other areas where you might not be heavy enough?’ These technologies will help form those decisions,” Fiore explained.
With companies having a finite amount of capital to deploy, both Fiore and Superczynski are heavily focused on ensuring clients are maximising on the opportunities in front of them.
However, for those companies that have excess capital they want to deploy, Fiore said this is “where Aon and its deep-end venture strength and data is available to help clients find those areas of the business that are profitable, and where they can manage their expenses”.
He added: “They can use the latest technology to grow that business, and it will help our clients form business strategies around those types of things and look for ways to deploy it. And diversify the portfolios as best as you possibly can.”
In terms of where those deployment opportunities are, Superczynski pointed to reinsurance and Lloyd’s as key markets, but also some of the growing lines such as cyber, mortgage, transaction liability and intellectual property.
“Those are lines where there is desperate need for capacity and the return metrics are pretty strong right now,” she said.
Watch the full 16-minute interview with Aon’s Jim Fiore and Kelly Superczynski to hear them discuss:
- The motivations behind launching STG and Capital Advisory
- The importance of harnessing tech and data to inform optimisation decisions
- Challenges facing clients
- Opportunities in the legacy market and where capital can be deployed