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Aviva seeking to buy more multiyear reinsurance at Jan. 1

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Aviva seeking to buy more multiyear reinsurance at Jan. 1

Aviva PLC is aiming to increase the percentage of multiyear insurance cover it buys at the Jan. 1, 2020, renewal, according to group reinsurance and credit director Scott McIntosh.

Speaking to S&P Global Market Intelligence ahead of the annual reinsurance industry meeting in Monte Carlo, McIntosh said about 40% of Aviva's reinsurance program was bought on a multiyear basis last year. He hopes to see that number increase at the coming renewals.

"We have been gradually moving towards multiyear purchasing, so that's going to feature again at this renewal," he added.

Roughly half of the world's reinsurance renews at Jan. 1; that renewal date is dominated by European business. While reinsurance typically renews annually, and prices are subject to change according to catastrophe loss activity and other market conditions, multiyear deals allow buyers and reinsurers to set the price for several years, which can be helpful for both sides.

McIntosh said the benefit of multiyear deals to reinsurers was more certainty around their market share, enabling them to budget better. For Aviva, McIntosh said the benefits were smoothing reinsurance spend "so we don't see wild price movements" and allowing the company to price its own primary insurance products "in a more reliable way."

A survey published by rating agency Moody's Sept. 6 indicated that buyers were expecting reinsurance prices to be flat to moderately up overall. However, it also showed that increases are expected to be confined to loss-hit areas, and that those insurers with large European books of business were expecting minimal, if any, price increases.

McIntosh is expecting a flat renewal, noting that it had been "a relatively quiet year" for large losses in Aviva's key markets, which include the U.K. and Canada.

In other changes, McIntosh said that Aviva had "experienced a little bit more concentration" of its reinsurance panel, and had bought a greater share of its program from midsized reinsurers. He added that this change had not affected the credit quality of the reinsurance program because a number of these companies have very strong financial strength ratings.

Aviva has also been looking to tackle its cyberrisk exposure through reinsurance. McIntosh said the company had bought reinsurance cover that protects the company on an event basis, rather than an aggregate basis. McIntosh said the product would cover Aviva for "a cyber-related power failure or that type of loss."