Moderating prices in Europe despite tight capacity says Aon

Insurance pricing for EMEA and UK risk managers is moderating but remains elevated for cyber, US-exposed, natural catastrophe and automotive risks, according to Aon’s Q4 Global Market Insights report. It adds that capacity is tight but sufficient in most cases.

The report explains that favourable local insurer pricing is, in some countries, creating competition in the market at large, but capacity is tight, especially for cyber, D&O and natural catastrophe-exposed property, and casualty.

It says new capacity has entered the market but total available capital remains below previous levels in some segments. However, appetite is expanding in some products, such as trade credit. Coverage has largely stabilised, except for restrictions imposed on cyber and financial lines.

Aon says: “Underwriting discipline, rigour and scrutiny have strengthened across both local and multinational risks. Robust submissions are receiving the most favourable responses. Most placements are renewing with expiring limits. There is a growing trend amongst insurers to reduce maximum limits, leading to more layers/co-insurance per placement. Deductibles are under pressure, especially related to US-exposed risks.”

Germany
Appetite for property has contracted as loss ratios remain high, and insurers remain focused on portfolio remediation and continue to impose substantial rate increases, particularly for large natural catastrophe-exposed risks and poor performing risk types, the report says. Capacity is generally sufficient, although insurers remain highly cautious about where it is deployed. Challenging market conditions are expected to continue but will likely ease for most risks, with the key exceptions of distressed risks and critical industries such as food and recycling, says Aon.

For casualty/liability, insurers are reviewing their portfolios and adjusting coverages and pricing where needed, with a particular focus on complex risks, the report notes, with product recall and product liability experiencing the most challenging underwriting environment. Cyber pricing continues to escalate and underwriting requirements have become onerous for insureds, while insurers are reducing capacity on an individual-risk basis. D&O is seeing significant price increases, rigorous underwriting practices and continued capacity contraction. While capacity is generally sufficient for most risks, maximum capacities have been markedly reduced.

UK
Conditions remain challenging for property, with rate corrections continuing across the board. However, where previous corrections have been applied, the current, additional increase is moderating. Appetite and competition are expanding for certain sectors and/or where risk management progression can be evidenced, and while capacity is expected to be sufficient for most risks, heavy industry occupancies will remain challenged, says Aon.

For casualty/ liability, underwriters are reducing their lines, ventilating layers, increasing pricing, and tightening terms and conditions, the report says, although conditions are expected to stabilise, with an easing of price increases during 2022. Insurers are implementing more stringent underwriting approaches for cyber, resulting in a reduction in available capacity. D&O market conditions eased throughout 2021 and new capacity has entered the market. Early signs point to an expansion of insurer appetite, which should serve to increase market competition and further stabilise pricing and capacity, says the report.

Iberia
The property market is challenging, especially for risks in the food, waste and chemicals sectors, as well as natural catastrophe-exposed risks, the report notes. Robust underwriting information is key to attract markets and secure the best results. Price increases have stabilised for some risks but remain significant for poor-performing risk types and geographies, natural catastrophe-exposed risks, and industries with adverse experience such as food, waste, wood, pulp and paper, and chemical.

Capacity and profitability challenges remain for casualty/liability, with the greatest impacts experienced by automotive, pharmaceuticals and rail risks, as well as risks with US exposure/activities, according to Aon. Well-performing risks are generally renewing flat, while other risks are experiencing modest increases. Cyber is seeing significant price increases, rigorous and rigid underwriting, and constrained capacity, while extensive, detailed information is required. For D&O, market conditions will remain difficult in 2022, particularly in the primary layer, but may further stabilise in the higher excess layers.

Italy
Property market conditions remain challenging, particularly for multinational risks. Capacity is constrained, significant price increases are the norm, and deductible increases are being mandated. While well-performing, non-cat-exposed risks may experience single-digit increases, poor-performing and/or cat-exposed risks are experiencing more significant rate increases. Insurers are reducing their participation, requiring more policies and insurers to complete placements, Aon notes.

For casualty/liability, pricing is up materially for most risks, with poor-performing sectors, like automotive and life science, experiencing very challenging conditions. Insurers have reduced their limits offered, requiring programme structures to change; for example, from a single policy issued by a single insurer to a layered placement with several insurer participants. Cyber is volatile and challenging, with significant rate increases, and despite new capacity entering the market, it is not sufficient, says the report. For D&O, poor-performing sectors and risks, as well as startups, are experiencing very limited appetite and the most challenging market conditions; but overall, price increases continue, although they have decelerated.

Netherlands
The Aon report states that while property market conditions have generally improved, they remain challenging, especially for poor-performing risk types such as food, feed, waste and chemicals. Single-digit rate increases can be achieved in most cases, although distressed risks are still facing significant increases. Aon says insurers are cautious yet demonstrating some flexibility, especially for well-performing risks with robust underwriting information.

There is less capacity available for casualty/liability on both primary and excess layers, together with increased pricing, intensified underwriting rigour, coverage restriction mandates and slow insurer responses, says the report, with more reliance on captives when available. Cyber pricing continues to escalate and underwriting requirements have become onerous for insureds. Severe rate increases continue, capacity continues to tighten and underwriting is rigorous, with extensive, detailed information required. Limits are decreasing and significant deductible increases are being mandated by insurers. D&O market conditions have eased somewhat, with the key exception of risks that have experienced material Covid-19 impacts.