The head of Aon’s newly-minted Reinsurance Solutions business Andy Marcell has said rates in the sector still favour those seeking capacity.

However in an interview with Re-Insurance he said reinsurers were still turning a profit, identifying carriers as a target for investors.

“We think it’s still a buyer’s market, unless something happens between now and 1.1 that substantially changes that – and I can’t imagine that there’s anything right now that would change our view,” he said.

“And we think our clients will be in good shape to buy affordable and effective reinsurance.”

The executive said the downward pressure on rates was driven by the “imbalance of demand versus supply”. Although he noted that the dynamic differed by region.

And Marcell hinted there was more to come. “Supply is still growing – so natural economics means there will be downwards pressure on rates.”

“It will be interesting to see what happens in terms of the psychology of the market,” he said.

“This year we saw a slightly firmer market at 1.1 versus June or July – so it got softer as the year progressed,” he noted, predicting a continuation of that softening at the forthcoming 1 January renewals.

But he said reinsurers were still turning a profit. Using Covea’s failed $8.3bn bid for Scor as an example, Marcell said: “Is reinsurance profitable? People continue to want to invest and buy reinsurers. So clearly there’s opportunity and profit in the reinsurance space.” “People are attracted to the market,” he said.

“Capital is coming in not because it’s a loser,” Marcell said, adding: “It’s because they see attractive returns in and of themselves and relative to other opportunities.”

“We don’t see that changing at all,” the executive said.

As an example, he pointed to Aon’s most recent report on the ILS sector, which shows that alternative capacity in the market had hit almost $100bn by the end of June. That marked a more than 10 percent increase on last year.

Marcell said he believed reinsurers had come to terms with the influx of alternative capacity – that has put downward pressure on rates over the last decade – and in fact have been able to use it to their advantage.

“Now – not every reinsurer by any stretch of the imagination – but many significant reinsurance partners that we trade with have links to ILS funds, they’re underwriting on behalf of them,” he explained.

“And I think it’s helped them manage their cycle through their own return expectations relative to the return expectations of the funds.”

“They’ve actually utilised that effectively to maintain their brands, their market position and their relevance.”

He said the broker’s newly minted practice, Aon Reinsurance Solutions business, was developing new products in the credit space where some of that surplus capacity could be deployed, although he would not be drawn on the details.

“In the area of credit we see opportunities to transfer different types of risk into insurance and reinsurance policies – and we’re pursuing that,” he said, without divulging more.