The influx of capital to the insurance market is enabling insurers to keep rates down, but they could also be using the extra capacity to develop new covers, a senior Aon manager says.

The Aon Advanced Risk Finance Conference last week featured a number of Aon speakers challenging insurance markets to increase product range, with Chief Broking Officer, Pacific James Baum noting that half the issues in the Aon Risk Index that are keeping executives “awake at night” are uninsurable risks such as damage to brand and reputation.

“There has got to be an opportunity to develop a product range that deals with uninsured risk rather than throwing more capital at the insured space,” he told insuranceNEWS.com.au.

Mr Baum says brokers have to challenge insurers to keep the market relevant by innovating.

The Melbourne conference heard of a favourable buyer’s market for large Australian corporates.

Delegates were told new sources of capital from pension and hedge funds are allowing insurers to increase capacity, and insureds are benefitting from established insurers fighting to maintain market share in the face of competition.

Insurers’ underlying profits are also strong after relatively few catastrophes in the past 18 months.

Mr Baum says non-traditional capital is still less than 1% of the insurance market and a tiny proportion of the funds the new entrants have available to invest.

While some in the industry speculate the pension and hedge funds will desert insurance when returns elsewhere improve, Mr Baum says a better question is “not how long-term they are, but how much more they will put in”.