Aon’s Hunt: Industry challenges underscore need for facultative solutions

Buyers of reinsurance are beginning to turn to facultative coverage to overcome ongoing and emerging market risks, according to Laura Hunt, Aon’s US facultative insurance leader.

Even though the facultative reinsurance industry has experienced the same pressures as the broader reinsurance market over the past 10 months, these challenges have underscored the importance of facultative solutions in an uncertain market and created demand for additional solutions, Hunt told The Insurer TV.

She noted that demand for facultative reinsurance has also remained strong as it is increasingly used to strategically address gaps left by treaty programs, especially where there are limitations or exclusions.

The demand for specialised facultative insights is also growing, driven by evolving risks, market conditions and specific industry challenges, she added.

Hunt highlighted two evolving areas of risk that are driving demand for specialised facultative solutions, namely cyber risks and natural resources

She said the demand for specialised solutions in cyber is rising due to the sophisticated, widespread threats that clients encounter on a daily basis.

“The constant evolution of these threats – including ransomware, data breaches, supply chain attacks and the potential for large, systematic cyber events that affect multiple insureds simultaneously – has heightened the need for targeted reinsurance solutions,” she said.

For example, the recent CrowdStrike IT outage, which caused widespread global disruption, demonstrated the types of specialised solutions needed to help clients protect their business.

Hunt added that natural resources are also driving the demand for tailored reinsurance solutions because changes in industry practices, such as the adoption of renewal energy, are creating new risks that are highly complex and highly specialised.

In addition, the high value of these assets and the potential for significant losses underscore the importance of facultative insurance as a tool.

As a result of the ever-evolving risks, Aon has entered new markets, developed new products and expanded clients’ operations to help them better manage risks.

“This tailored approach ensures that our clients can pursue growth opportunities with confidence, knowing they have the necessary protection to fill in the gaps,” Hunt said.

Hunt also emphasised the importance of building the best-in-class teams to manage these specialised risks effectively.

“It's important that we have brokers who understand these areas to help our clients with these needs. Our brokers need to be able to speak adequately to reinsurers and to clients to be able to get the coverage solutions they need,” she said.

Aon has also built the only dedicated US facultative unit to better align with its clients and the commercial risk sector to service its clients' needs for these evolving risks.

Watch the 15-minute video with Aon’s Laura Hunt to hear more about: