Aon has launched a capital advisory unit within its Reinsurance Solutions division to help (re)insurers, Lloyd’s syndicates and captives ‘fine tune’ their balance sheet and boost capital optimisation.

The broker said the new unit will work with clients on how they can better achieve capital efficiency either by accessing alternative or traditional capital, or identifying opportunities that make better use of existing capital, while taking into account cost and returns.

The division will also advise clients on how best to reduce Solvency II capital requirements via reinsurance and will aim to improve insurers’ investment strategy in order to drive investment efficiencies and better optimise insurers’ capital mix.

“We’re in a market place where the triggers in which to make money are fairly modest and that’s reflected in financial results,” Nick Frankland, UK CEO of Aon’s Reinsurance Solutions business said today (9 September) at the Monte Carlo Rendez-Vous.

“The consequence of this is that clients are having to look more closely at how they access capital,” Frankland added.

“They’re having to look at how they work their own capital models to become more efficient and optimised in how they allocate capital for the risks they underwrite.”

The team will be led by Eric Paire, who joined Aon from rival Guy Carpenter in March 2018.

Eric Paire, head of Capital Advisory within Aon’s Reinsurance Solutions business, said: “There is no single move, no silver bullet, that will restore insurers’ profitability overnight.”

“It is all about fine tuning and optimising the various components of the P&L and the balance sheet for increased operating and financial margins, and an enhanced capital mix, while reducing volatility and allocated capital for a lower cost of capital.”

Frankland said the move would help to cement the role of the broker as a “broader advisor” to carriers.

To deliver this, the CEO said Aon has drawn together expertise in reinsurance, P&C and life, analytics, rating agency advisory, asset management, M&A and capital markets.

“Reinsurance is only one form of capital available. Almost all the other forms exist in a world not particularly in our expertise,” he said.

“We’re having to develop the skills on both the reliability and asset side of the balance sheet to advise clients on where most appropriately reinsurance as tool fits.”

Currently based in London, the broking house said its goal is to expand the capital advisory offering to the US.

“In a low interest rate economy with pressure on returns, we are committed to working with insurers as their strategic partners to optimise the capital supporting their businesses,” Frankland said.

“We have a head start with our intrinsic knowledge of clients’ operations as their reinsurance intermediary, and can bring an additional focus on P&L with our specialist skills from across Aon.”