Reinsurance rates in Australia and New Zealand may fall further, Aon Benfield Australia and New Zealand CEO Robert De Souza says.

And with increased demand from reinsurers to write Australian and New Zealand business “let’s use it, let’s soak it up”, he told the Aon Advanced Risk Finance Conference last week.

Mr De Souza says rates have not returned to levels seen before the Christchurch earthquakes and Brisbane floods of 2011.

Alternative capital flowing into the reinsurance market stands at about $US59 billion ($67.13 billion) at June 30, compared with $US511 billion ($581.38 billion) in traditional capital, but it has roughly doubled the catastrophe protection available, the conference heard.

Some industry watchers have raised fears the new investors will desert reinsurance if they have to pay out a full loss, but Mr De Souza says alternative capital now has a track record of paying out claims and “reloading” for more risk.

“They are not one-hit wonders.”

The conference also heard how Big Data presents a challenge for risk management, by increasing the speed and volume of information collected.

Aon’s Dublin-based Chief Innovation Officer Stephen Cross says it is increasingly important to understand interdependencies around risk, how data enables different parts of the world to be connected and how this can affect business resilience.

He wants industry innovation to help clients understand and address cyber risks.

“Cyber risk is to our industry what asbestos was to the building industry – a ticking time bomb just waiting to explode.”

Mr Cross says many key risks identified by business are not covered by insurance, such as the impact of economic slowdown and regulatory changes.

But Aon’s Global CEO of Analytics Stephen Mildenhall sees this changing.

He says there may not currently be enough data to quantify a risk, but whenever a computer records information it goes towards building a database that will in future generate models.

Aon Australia CEO Lambros Lambrou agrees insurers must find ways to cover emerging risks.

When something goes wrong outside the “comfort zone” it is more likely to be catastrophic, but the industry has struggled to develop strategies relevant to clients’ needs in the catastrophic risk space, he says.

“The risk industry must stay ahead of clients and develop risk mitigation and financing strategies if it is to continue offering value and relevance.”

Mr Lambrou told the conference Aon’s sidecar deal with Berkshire Hathaway received “an unbelievable amount of bad publicity”, but Aon went ahead with the coinsurance arrangement because it had enough data on claims and premiums to know it could get a better deal for clients.

He worked on the transaction, which he says has delivered increased premium to Lloyd’s and recorded conversion rates to the sidecar of 80-90% a month.

“When clients are voting with their feet, you know you are doing the right thing,” he said.