SCOTTSDALE, Ariz.–The head of a major insurance brokerage said yesterday he doubts there will be much hardening of reinsurance prices in the immediate future.
At a gathering here for the Property Casualty Insurers Association of America (PCI) annual conference, Paul Karon, chairman of Benfield Inc., told National Underwriter he thought reinsurers were talking up hardening of the market but not living up to the verbiage.
“I don’t think their hearts are in it,” he commented, adding he also thought reinsurers lacked “the intestinal fortitude” to risk losing business with rate increases.
Mr. Karon, whose company was purchased by Aon, is due to become chairman of the merged firm’s reinsurance operation, Aon Benfield Re, when regulatory approval finalizes the deal.
He predicted that in January the market would be flat, but that in April, working on June renewals, rates may rise 10 percent for property catastrophe coverage.
The net reaction of customers to the Aon Benfield merger, he said, has been positive, with the reduction in choice outweighed by an expected improvement in services.
Mr. Karon said he looks forward to working with an increased research and development budget, noting that Aon’s capital far exceeds that of Benfield.
The merger will bring some workforce reductions to eliminate redundancies, he said, but he declined to say when and who the cuts might affect.
He added that Aon has stated that in looking at personnel, the company will be a meritocracy.
In terms of business movement, Mr. Karon said this meeting was different from past sessions because he saw a number of companies looking to take advantage of American International Group’s difficulties and siphon away business from the firm. “They [AIG] are under attack. I do not envy them,” he remarked.
Mr. Karon said he could not guess whether AIG would lose one policy or thousands.