Aon chairman and chief executive Dennis Mahoney has called a summit of 40 senior Aon managers to tackle the looming capacity crisis in the insurance industry.
The meeting took place last Friday at Aon's London headquarters. The managers included captive insurance and risk management experts.
Mahoney is worried underwriters in the London Market will not be able to cover the risks of key clients because they have already reached their premium income ceiling for the year.
He said: “We are having a meeting to explore how to understand the capacity issue, to find ways of explaining it to our customers and to find alternative solutions so their risks can bcovered.”
Mahoney said self-insurance was a key element of the solutions Aon was exploring. He added Aon was in talks to buy a captive insurance specialist.
An announcement will be made in the next two weeks.
Earlier this month, Aon bought captive insurance specialist Sinser from Skandia Insurance. Sinser handles the administration of more than 250 captive insurance companies and has annual sales of £8m.
Mahoney said the current hardening of the market was not just another cycle. He said rates had been in decline for 12 years and that underwriters could not now raise premiums high enough to cover the consistent underpricing over this period.
He added the current financial climate meant underwriters assets were not valued highly and that investors were not putting money into the market.
“Capacity surplus has been depleted,” said Mahoney. “We are facing a very difficult period of months, if not years. One solution is using more captive insurance.”
Last week, Insurance Times revealed that Lloyd's underwriters were turning away business because they had reached premium income capacity.
It is estimated that next year's underwriting capacity will reach £13bn. This compares to a capacity of £11bn in 1991.