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28 January 2025news

Aon: risk capital market dynamics changing

The risk capital landscape is poised for change, driven by emerging trends reshaping market dynamics, according to a new report by broker Aon.

With a buyer-friendly market currently prevailing across most lines, opportunities abound for strategic investment and risk management, Aon said, adding that businesses must embrace resilience strategies to tackle unpredictable climate impacts and accelerating AI-driven cyber threats.

According to Aon the insurance industry should prioritise talent acquisition and retention strategies to address potential workforce shortages and enhance expertise in emerging risk areas for better client service.

“The re/insurance industry is in a transformative cycle driven by a convergence of systemic risks reshaping market dynamics,” said Aon in a statement. “The interplay between economic pressures, geopolitical shifts and environmental challenges creates a complex backdrop for businesses navigating their risk management strategies.

“Risk financing is also evolving at an unprecedented pace, with a growing array of instruments available to support companies’ economic objectives. As interest rates are expected to decline, traditional insurer investment income will face pressure, prompting a greater emphasis on achieving underwriting profit. This shift will necessitate a focus among insurers on pricing adequacy, which will need to be delicately balanced with competitive pressures in a well-capitalised environment.”

Given the current buyer-friendly marketplace conditions, Aon said that organisations should use this moment for strategic investments and innovative risk management solutions. However, it is crucial for clients to stay informed about the key trends that will not only impact their immediate risk profile, but also influence their long-term strategies.

The five risk capital trends that Aon believes will shape the market this year resonate with Aon’s Four Client Megatrends — trade, technology, weather and workforce — and reflect the systemic risks that businesses face today are:

• Bolster Resilience Against Escalating Climate Uncertainty

• Harness AI to Navigate Emerging Cyber Risks

• Mitigate Exposure to Nuclear Verdicts with Proactive Strategies

• Address the Insurance Talent Challenge to Deliver Client Growth

• Utilise New Tools and Strategies to Make Better Decisions for Managing Risk Capital

For more information, contact Aon to read the full report.

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