EMEA buyers enjoy ‘transitional’ market: Aon

Risk and insurance managers in Europe, Middle East and Africa (EMEA) are beginning to enjoy the benefits of increased competition in many core lines but still face rising rates for catastrophe-exposed risks, according to Aon’s latest market analysis.

In its Q2 2024 Insurance Market Trends report, Terence Williams, chief broking officer commercial risk solutions EMEA at the firm, says: “The best way to describe current market dynamics would be to call it transitional. We continue to see rate increases related to elements of natural catastrophe, but at the same time we are seeing reductions across a number of lines, including non-cat exposed property.”

Aon says that the recent hard market and better insurer results have created a “growth focused” environment in 2024 characterised by rising capacity and improved pricing for buyers.

Challenges continued in EMEA during Q2, however, for automobile/fleet insurance and higher-risk industry segments, as well as for risks with “highly scrutinised” exposures.

“New capacity continued to enter the market, primarily from smaller insurers focused on growing their portfolios, often opening offices in new territories. Overall, capacity was sufficient and, in some markets, abundant. Capacity restrictions were common in the Nordics,” notes Aon.

“Alongside the general improvement in market conditions, underwriting became less rigorous, with a trend towards prudent/flexible while maintaining caution. Portfolio-wide restrictions were not imposed, given the actions that had taken place in recent years,” adds the broker in its Q2 EMEA analysis.

Underwriting was, however, more rigorous for natural catastrophe-exposed risks, particularly related to contingent business interruption limits. US exposures, PFAS exposures and challenging industry sectors also faced more stringent underwriting.

Limits remained flat on average. However, there was more flexibility in deploying capacity on targeted risks and risk types, says Aon.

“In areas of the market experiencing buyer-friendly conditions (e.g. D&O), some insureds explored coverage, limit and deductible options to take advantage of the favourable market conditions,” says the broker.

Expiring deductibles were reportedly available in most cases as insurers managed their profitability through coverage terms and conditions and pricing.

“Even poorly performing property risks experienced more moderate deductible options at renewal. As the market continued to soften, broader coverages became available in pockets, although most placements renewed with expiring coverages. Long-term agreements and coverage reinstatements/broadening were available in the D&O market,” says Aon.

Despite the balanced market, Aon continues to advise risk managers to engage early on renewals to secure the best possible results.

“Engage early – at least six months in advance. Outline clear expectations around best- and worst-case scenarios while remaining realistic and flexible, especially where US-exposed and natural catastrophe-exposed risks are concerned,” it says.

The broker also advises risk managers to keep a close eye on rapidly evolving rules and regulations in corporate governance and due diligence standards, despite the much healthier D&O environment.

“Be mindful of how the D&O risk environment has changed as standards of corporate governance have evolved, and recognise the change in the relationship between companies, their directors and the wider range of stakeholders that spans well beyond the immediate shareholders. Work with Aon to understand your risk related to the new corporate transparency standards, especially in relation to climate impact, as well as responsible oversight of supply chains,” says the broker.

Aon also urges risk managers in EMEA to take a fresh look at the cyber insurance market given the dramatically changed underwriting conditions at recent renewals.

“Reconsider your cyber insurance programme to take advantage of current favourable market conditions. This may include re-entering the insurance market, if applicable. Leverage data and analytics to quantify your cyber risk and evaluate limit adequacy. Be sure to maintain the confidential nature of insurance policies,” says the broker.