Aon’s reinsurance auction platform will deliver cost savings to customers via increased efficiencies rather than brokerage reductions, as it gears up to transact business for the 1 January renewal.
Aon Reinsurance Solutions CEO Andy Marcell told journalists at the Monte Carlo Rendez-Vous that cost efficiencies from the auction platform would be generated in terms of time commitment and the amount of people needed to complete a transaction.
He said Aon had “no expectation” for how much business will be transacted via the platform at 1 January, and that it would take time for Aon brokers to articulate the value of the proposition to clients.
“You may think it is unusual to invest in a technology without knowing what the exact return will be but we will continue to provide choice and relevance to our clients and we will be in the best position in the future, and that will be our return on investment,” he said.
Using the platform would come at no additional cost to the customer or the reinsurer, he added.
Earlier in the conference Marcell said he envisaged that the platform would be most effective for Aon’s global cat portfolio.
He also said clients in Asia in particular had expressed interest in finding efficiencies in the way they transact their reinsurance placements.
Any reinsurer which uses Aon’s placement platform ABConnect can take part in an auction process.
“The reinsurance industry tends to evolve at different rates and the placement side of it is an area we think can continue to evolve,” Marcell said.
The platform enables blind bidding for both non-concurrent placements, where reinsurers receive different pricing based on the quotes provided, and concurrent placements, where the technology identifies a consensus bid. That means each reinsurer receives the same price for the layer.
Insurers will mutually agree the contract wording with reinsurers before the auction begins, thereby cementing contract certainty.
Reinsurers will then enter single or multiple price points, as well as the corresponding capacity at each price point for the various layer or layers in a blind bid.
Working with their broker, the Aon client will determine its maximum auction price point for each layer.
The auction platform’s algorithm will identify the clearing price at which to complete the placement at or below the insurer’s maximum price point.
Should the insurer’s price be matched with that being demanded by the reinsurer, the bid is then bound and automatically accepted.