German insurance buyers face more relaxed liability negotiations: Aon

Rare positive news comes for German risk and insurance managers as they gather for their annual GVNWE Symposium, as Aon reports that the industrial liability insurance market has finally “calmed down” after hardening over recent years. “A stabilisation of capacities can be observed,” said Thomas Gahr, head of liability at Aon’s German broking center, in the companies German market report published for the GVNW event. Gahr concludes that, overall, premium demands from German liability insurers are already more moderate than in previous years. But companies with complex risks must continue to expect higher premiums and restrictions in the scope of coverage. Industrial companies right up to the so-called upper middle market are not affected in the same way because many insurers want to grow in this segment. The relevance of ESG criteria in underwriting is on the rise, notes Gahr, echoing a trend spotted throughout the European industrial insurance market this year. Aon points out that, according to current figures from the German insurance association (GDV), the general liability insurance segment remains “attractive” for insurers. Private individuals and companies in Germany spent €8.4bn on liability insurance last year, according to the GDV. The association expects premium income to increase by 3.5% this year and predicts a claims cost ratio of 86%. Developments are rather different in the industrial liability insurance business though, stresses Gahr in his report. Overall, the market for industrial liability insurance has calmed down. Multi-year agreements (LTAs) are also back on the table. “In principle, sufficient capacity can be purchased. The reduction in the capacity of some insurers is noticeable in liability insurance, with high insured sums and companies with complex risks. Overall, capacities are stabilising,” said Gahr. The relatively positive picture is not so evident, however, for those German insurance managers with US risks. “Particular attention is paid to US risks and claims developments in the US. Major losses are more frequent and tend to be higher,” said Gahr. This has led to more cautious underwriting behaviour by insurers for companies with extensive US exposures. The causes include social inflation and litigation financing by specialist companies and law firms. “The trend towards higher US major losses particularly affects product liability and automobile liability claims,” said Gahr. Looking ahead, he said it remains to be seen whether the wider liability market will ease further as a result of insurers’ growth targets and the capacity offered by new carriers. “For these companies, the ‘risk quality’ factor and the technical assessment of the risk are very important for the insurers’ risk appetite. Insurers are relying more heavily on technical underwriting and are particularly taking a close look at companies with complex risks. Well-prepared risk information and a timely risk dialogue in the renewal process are very important here in order to be able to use the full scope in the negotiations,” Gahr concluded. As noted by many risk and insurance managers in this, Commercial Risk’s latest annual Risk Frontiers Europe survey, ESG is becoming increasingly relevant during renewal negotiations. Gahr sees the same trend in the German industrial insurance market as elsewhere. “The relevance of ESG criteria in underwriting is increasing. The focus is particularly on ‘green’ strategies in the fight against climate change. Insurers’ risk appetite is increasingly based on whether the company is based on ESG criteria and sustainability strategy complies with the insurers’ ‘green’ underwriting policy,” he said.

German insurance buyers face more relaxed liability negotiations: Aon

Those with US exposure can expect a tougher time

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