Global insurance market now in flat territory: Aon

Things continued to improve for insurance buyers in Q2 as insurer growth plans saw risk managers enjoy a competitive, well-capitalised market environment, characterised by further price moderation, underwriting flexibility and mounting coverage options, according to Aon.

The broker says in its Q2 2024: Global Insurance Market Overview that pricing was flat across all global regions during the second sector, with buyers across the world facing ample capacity overall, flat limits and deductibles, stable coverages and prudent underwriting. But Aon adds that the market remains disciplined.

Flagging key market takeaways, Aon says that competition fuelled by insurer growth ambitions led to buyer-friendly property market conditions for the majority of risks.

“The US market in particular experienced its most favourable conditions in almost seven years. Desirable risks with profitable historical loss ratios experienced pricing outcomes ranging from single-digit increases to low double-digit decreases,” it says.

But Aon notes that property risks in the Nordics, Brazil and Mexico, as well as certain high-risk sectors, experienced more challenging market conditions and less favourable placement outcomes.

Meanwhile, the D&O and cyber markets continue to benefit from healthy competition and abundant capacity. However, Aon explains that some D&O insurers with a strong focus on programme stability were less inclined to decrease prices during the quarter, particularly in high excess layers.

“Despite rising claims, the cyber insurance market remained buyer friendly with continued savings, particularly in high excess layers. Interest in cyber insurance continues to broaden beyond the US and Europe, with growing awareness of cyber incidents and capacity,” Aon says.

The outlook isn’t as rosy for all risks. US casualty exposures on both domestic and international placements continued to come under scrutiny during the last quarter, given prior-year reserve deterioration and ongoing concerns related to nuclear verdicts and adverse litigation trends, Aon reports.

“US-exposed and heavy industry risks experienced rate increases, more restrictive terms and conditions, and higher umbrella attachment points. Well-performing risks and those without US exposures generally saw healthy competition as insurers sought growth,” it says.

More broadly, Aon says that insurer growth ambitions and healthy competition resulted in “broadly flat” overall market pricing in Q2, as upward pressure on rates continued to moderate.

The even better news is “pockets” of preferred and well-performing risks experienced price decreases. But less preferred and challenged risks continued to see price increases, albeit at lower levels than previous quarters. Aon says that risk differentiation remained important, with insurers pricing accordingly in Q2.

Pricing was helped as capacity and competition for quality risks strengthened further amid favourable reinsurance and alternative capital market conditions, and as insurers focused on growing their portfolios at attractive rates, the broker explains in its report.

“Capacity was broadly adequate, but abundant for preferred and well-performing risks, which often experienced oversubscription. More challenged risks and sub-sectors continued to face capacity constraints,” says Aon.

The broker says that most placement renewed with the same limits but with additional limits available on targeted risks. And at the same time, most placements renewed with expiring deductibles. “In some markets, deductible options were available, especially for non-catastrophe exposed well-performing risks, and insureds continued to evaluate deductible options to optimise program design and manage premium costs,” says Aon.

It notes that some insureds took advantage of the favourable market conditions by increasing their limits and exploring coverage and deductible options.

Terms and conditions were stable in Q2, with coverage enhancements and long-term agreements, supported by quality underwriting data, often available, says Aon.

But again there remain more tricky areas for buyers. “Reflecting continued underwriting discipline, exclusions such as per- and polyfluoroalkyl substances (PFAS), communicable disease, and strikes, riots and civil commotion were generally required. Risks related to Ukraine, Russia, Eastern Europe and Myanmar were scrutinised, and coverage for related exposures was limited,” says Aon.

It adds that the “capacity-rich market focused on sustainable growth and programme stability” is “good” news for insurance buyers, with many “taking advantage of the current market conditions by restoring coverages and limits that had been reduced during recent renewals”.

But Aon cautions that the market conditions remain fragile. It notes that nat cat losses remain volatile while adverse reserve development and social inflation make for an uncertain casualty outlook.

“A material deterioration in casualty loss trends, and/or outsized natural catastrophe losses, could materially impact future insurance and reinsurance market dynamics. We are monitoring forecasts, which are currently predicting an active Atlantic hurricane season for 2024,” says the broker.