German buyers suffer more challenging market in Q2 than European peers

The German commercial insurance market stood out as particularly difficult for buyers during the second quarter, according to Aon’s latest analysis, with cyber, D&O and fleet motor lines toughest of all. The broker described the German market as challenging with overall average rate increase between 11% and 30% during the quarter. This is higher than other leading EMEA countries tracked in Aon’s market dynamics report, with average price rises between 1% and 10% in the UK, Italian, Dutch and Iberian markets that were all described as moderate. Aon said German cyber, D&O and automotive markets were particularly challenging in Q2. Cyber saw the biggest rate increases of more than 30%, according to Aon. But this masks the even worse news for multinationals, which experienced the toughest conditions and sometimes triple-digit rises. Aon said cyber capacity remained significantly constrained in Q2 for German buyers, with underwriting stringent and rigorous, as information demands from insurers continued to increase. “Insurers remained conservative and there was little to no flexibility in underwriting,” said the broker. Cyber limits fell in response to rising loss costs and underwriters focused on limiting per-risk exposure. Deductibles went the other way and were higher, particularly for ransomware protection. Meanwhile, cyber coverage became more restrictive for German cyber risks during the second quarter as insurers focused on territory adjustment and war exclusions. Aon expects the German cyber market to remain challenging for the rest of this year as current conditions continue. But it doesn’t necessarily think things will get worse and has placed a moderate outlook on the line of business. The broker said rates were up between 11% and 30% for German D&O risks in Q2. It said price increases moderated slightly during the period, except in cases where risk profiles expanded or became less favourable. “The market continued to moderate in Q2, although conditions remained challenging due to inflationary pressures and uncertainty related to the geopolitical events in eastern Europe. Insurer appetite for new business expanded, even as underwriting scrutiny remained high,” Aon explained. D&O market capacity was described as ample and underwriting prudent. Limits and deductibles were flat and coverage stable. “Expiring coverages were achieved in most cases; however, coverage restrictions related to geopolitical concerns increased in Q2,” said Aon. It thinks the outlook will remain challenging for German D&O buyers. “Despite more moderate market conditions, they will remain somewhat challenged. Additional limits may become available as appetite expands and more capacity becomes available,” Aon said. The other line described as challenging in Q2 is automotive. Aon said market conditions became more challenging in the period, driven by the impact of Covid-19, product shortages, market closures in China, inflation and geopolitical events in eastern Europe. Pricing was up between 1% and 10% as repair costs rose, but capacity was ample and sufficient for most risks. Aon said automotive insurers became more conservative and cautious in Q2, with underwriting more stringent. Limits were flat but deductibles increases became more common, said the broker. The better news is coverage broadened as insureds pressed for more flexible terms and conditions to meet rising technology risk in the sector. Looking ahead, Aon expects the German automotive market will remain challenging. “Pricing will likely continue to increase as inflation, the geopolitical events in eastern Europe and other issues add to insurer uncertainty,” it said. While the German liability market was given a moderate rating in Q2 by Aon, things are not as easy for buyers as they once were. Rates rose between 11% and 30%, driven largely by inflationary pressure. But things were particularly tough for large and complex risks. “Market conditions remained favourable for midsized risks. Larger and complex risks experienced more challenging conditions as insurers were more conservative in terms of pricing and terms offered,” said Aon. It explained that capacity remained stable for German liability buyers and was available for most risks, despite de-risking and line resizing across certain insurers. Underwriting was prudent but large and complex risks again suffered a more stringent approach. Product recall and product liability continued to experience the most challenging underwriting environment. German liability limits were flat in Q2 but deductibles rose. Coverage remained stable even as insurers conducted coverage reviews for complex risks. Cyber exclusions were mandated by some insurers, Aon explained. It expects the current moderate liability market conditions to continue. “Appetite will remain strong for midsized risks with low complexity, as insurers continue to seek growth in this space. Underwriting scrutiny is expected to intensify, particularly for large or complex risks. Inflation will likely continue to drive rate increases,” it said. The German property market was also described as moderate in the second quarter as conditions stabilised following a tough time after the major floods in 2021. Pricing was up between 1% and 10% with, this time, small to medium-sized risks experiencing more challenging conditions as insurers focused on profitability. Aon said there was ample German property capacity in Q2, with the international market able to fill any gaps left by local carriers. Underwriting remained prudent, and detailed underwriting information was required in most cases. However, distressed industries may have experience a contraction of capacity or underwriting appetite, said Aon. Property limits were flat with expiring limits achieved in most cases. Deductibles increased to help offset premium increases and coverage was stable with any restrictions imposed on a case-by-case basis, Aon explained. Its outlook for the German property market is moderate, with current market conditions expected to continue for the rest of the year. “Mid-market risks are expected to remain less profitable than the larger risk space and as a result, insurers are expected to continue to review and reprice their mid-market portfolios,” said the broker. Of those covered in Aon’s report, trade credit was the best market from the German buyers’ perspective in Q2. Market conditions were stable overall as insurers competed on pricing. Pricing was flat with larger or well-performing risks potentially enjoying rate decreases. Trade credit capacity remained sufficient and reinsurance capacity remained available. Limits were flat. “Costs rose in Q2, especially for certain sectors, driven by the events in eastern Europe as well as inflation. As a result, additional limits were requested by insureds. In some cases, insurers were able to accommodate such requests; however, in many cases, limits remained flat,” said Aon. Trade credit deductibles were also flat and coverage stable, explained the broker. Things don’t look quite so rosy for buyers going forward. Aon expects the market to become challenging as insolvencies and credit risks rise to pressure limits. “Claims escalation is expected to impact underwriting, making some renewals more challenging,” said Aon.

German buyers suffer more challenging market in Q2 than European peers

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