Rate increases slow in Q1 but reductions remain ‘rare’, says Aon

Global market price increases continued to slow in the first quarter of 2022, with all regions recording “modest” rises of between 1% and 10%, according to Aon. In the EMEA and UK, Aon says rate increases decelerated across most lines of business but “the much-purported peak of the hard market, and inevitable decline into a softening trend, has not yet fully materialised”. Publishing its Global Markets Insights Report: Q1 2022, Aon says insurance market conditions were moderate in all markets and across all lines of business except cyber. D&O and property were the only other lines of business described as challenging, and only in the EMEA and UK. However, despite the improving market for buyers, soft market conditions only applied to employers’ liability and trade credit in North America, says Aon in its report. The broker adds that, besides cyber, global capacity was sufficient for buyer demand in Q1 on the back of new market entrants and appetite from existing carriers targeting growth. However, buyers faced greater underwriting scrutiny as carriers focused on their bottom line. At the same time, the quarter saw terms and conditions deteriorate – in particular for cyber, terrorism, sanctions and war, as well as coverage territory – in response to Russia’s invasion of Ukraine. While most classes recorded single-digit rate increases in the EMEA and UK region during Q1, Aon says decreases are still “relatively rare”. Aon says cyber is “the most challenging line of business” in the EMEA and the UK, where rate increases were above 30% in Q1 2022. D&O rate increases slowed in the region but remained at elevated levels and in some cases at 30% or more. EMEA and UK buyers faced a squeeze on capacity in cyber and D&O, Aon says, although capacity was also tight for casualty buyers in Iberia, Italy and the Netherlands, as carriers cut capacity and new entrants have yet to bridge the gap. Globally, Aon says the cyber market continued to be volatile in the first quarter. Although the frequency of claims was stable, cyber losses were described as complex, particularly following large events during the past few years. Aon reports an increase in waiting periods for cyber business interruption (BI) related coverage, including systems-failure BI and dependent BI. Some clients and industry sectors also saw the introduction of ransomware co-insurance provisions, ransomware sublimits and sublimits for BI and related coverage. “Insurers actively managed their global aggregate capacity [for cyber] and in some cases reduced limits offered. The underwriting process continued to gain rigour,” Aon says. It adds that insurers particularly scrutinised coverage for critical infrastructure and systemic events, restricting coverage on either a general or event-specific basis. Aon says the global property market benefited from better performance among insurers, which attracted fresh capital and moderated market conditions for most risks. The exceptions were industry sectors deemed high risk, loss-impacted programmes and where risk management was not evident. Aon’s report says rates and capacity stabilised in the casualty market during the first quarter of 2022. But things remained tricky for challenging industries, such as pharmaceuticals, difficult exposures such as wildfire and US-domiciled risks or non-US placements exposed to US risks. Aon says the D&O market was challenging for new public companies and US-listed companies in foreign domiciles. Carriers reacted in part to an increase in regulatory enforcement globally, it explains. “Underwriting scrutiny remained high,” but some underwriters showed signs of flexibility in areas where restrictions had only recently been imposed, Aon says.

Rate increases slow in Q1 but reductions remain ‘rare’, says Aon

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