The insurance protection gap is not being closed at the pace it should be, according to Nick Frankland, UK CEO of Aon Reinsurance Solutions, largely because of re/insurers’ failure to accept additional risk in a market that currently has an excess of capital.
“Public-private enterprise is the protection gap that we all talk about endlessly, but the industry does very little about it in many spaces,” Frankland said at a press briefing on the first day of the Rendezvous event in Monte Carlo.
He explained that even in markets that are considered to have relatively high insurance penetration, such as the U.S, the size of the protection gap remains unacceptable.
Frankland pointed to the catastrophe losses from 2017’s Hurricanes Harvey, Irma and Maria, of which only about 40% were transferred to the re/insurance industry, with many insured losses from these events also paid by government funding and certain pool recoveries.
“Realistically, traction amongst the various stakeholders involved in the de-risking of governments and the handling and pooling of difficult risk that normally falls back onto either governments or other broader benefactors is something that hasn’t moved forward as quickly as it should have done,” Frankland said.
“It is patently obvious that we’re not transferring or accepting enough risk efficiently in a commercial marketplace that has abundant capital and capacity,” he added.
Aon has recently attempted to address this deficiency by establishing a public-private enterprise specialty in London, which will connect with Aon Securities and with Aon’s government specialty in North America.
In doing so, Frankland said that Aon aims to encourage the fulfilment of the protection gap by providing “a global forum and a linkage of everything that Aon can bring to the table in trying to raise the stakes in the dialogue.”
