Aon's CEO Greg Case says the Lloyd's market should not react negatively to its co-insurance agreement with Berkshire Hathaway and indicated it could bring positive development to the Lloyd's market.
Aon Risk Solutions announced an agreement with Berkshire Hathaway International Insurance Ltd. in March to provide sidecar capacity to retail insurance clients across all industry segments. The deal brings highly rated paper to all eligible business placed by Aon Risk Solutions where the Lloyd's market participates. The move, according to reports, opens up more than 7 percent of Aon's placements at Lloyd's to Berkshire Hathaway, upsetting the market.
During a conference call discussing the insurance broker's 1Q results, Case says the move is a client solution and that “client reaction from the announcement has actually been quite positive.” He says that for clients having trouble obtaining coverage, this agreement provides capacity “that just wasn't there before.”
For Lloyd's, Case says, “We actually provide some positive momentum into the Lloyd's marketplace overall, and we're going to continue to discuss it with them,” adding that Lloyd's is a very important partner and the discussions will continue. He notes that Aon is roughly 23 percent of Lloyd's business overall, and he believes, the single largest partner. He emphasizes that the program's sole focus is to benefit Aon's customers.
“From our standpoint, we see this as a net positive overall,” says Case.
Aon, headquartered in London, says 1Q net income grew 9 percent to $272 million on revenues of $2.9 billion, an increase of $74 million or 3 percent. The broker reports gains in all segments of its business with commissions and fees in its insurance division up 4 percent to $1.96 billion and organic growth up 3 percent. In its human resource division, revenues increased 1 percent to $954 million.
The insurance results reflect retention rates of more than 90 percent on average and new business generation of approximately $240 million across the firm's retail business and regions.
In reinsurance, organic growth was 1 percent, down from 5 percent for the same period last year. Case says record capacity levels have cedents retaining more risk “driving an unfavorable market impact in the quarter.” The segment saw growth in consulting services and facultative placements, as well as capturing new business.
Aon's human resource business is still suffering the adverse effects of the economic downturn, but Case says there is optimism for improvement in this area as clients are renewing “their focus on talent, retention, development and engagement to prepare themselves for renewed long-term growth.”
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