Two-tier market in play despite more stability for many buyers: Aon

The global commercial insurance market stabilised in most regions during Q3, with average rate increases between 1% and 10%, according to new figures from Aon, but the broker warned that a two-tier market is now clearly evident and the impact of Hurricane Ian is set to be felt in this quarter and beyond. Aon’s third-quarter Global Insurance Market Overview shows that rates were up between 1% and 10% on average in EMEA and the UK, North America and Asia-Pacific in the third quarter. This more moderate environment is backed up by Aon describing market capacity as ample, underwriting prudent, limits and deductibles flat, and coverage stable across these four regions. The exception was Latin America, where rates increased between 11% and 30% and buyers faced constrained capacity, rigorous underwriting and higher deductibles. But Aon says in its market overview that the global pricing environment was “competitive and healthy”. “Modest price increases continued, driven upward by inflation, supply chain challenges and labour shortages, while improved insurer performance, increased capacity and insurer focus on retention and growth had a dampening effect,” explains the broker. However, it warns that a two-tier market developed further in Q3 with higher risk sectors, poor-performing business and nat cat-exposed placements experiencing more significant price increases. “A two-tiered market became more pronounced across a significant portion of the market, with products and in-appetite risks targeted for insurer growth experiencing flat or decreased pricing and abundant capacity, while challenging, poor-performing or out-of-appetite risks experienced material rate increases and tight capacity, although these conditions moderated somewhat from previous periods,” explains Aon. It says that additional capacity entered the global market in certain areas where insurers are targeting growth. According to Aon, capacity was generally sufficient for most risks apart from cyber and nat cat exposures, which faced pressure from the reinsurance market. It adds that insurers became more conservative towards nat cat risk in the aftermath of Hurricane Ian and predicts things will get tougher for buyers in this area going forward. “As the full market impacts of Hurricane Ian materialise, a shift in pricing and capacity is widely expected to ripple across the primary and reinsurance market in Q4 and beyond,” Aon warns. But in general, market conditions remained moderate for property cover in Q3 despite Hurricane Ian, according to the broker. “Cat-exposed risks and challenging occupancy types experienced continued upward pressure on pricing while flat pricing could be achieved for most preferred risk. While capacity was generally sufficient, some insurers reduced their line sizes due to the impact of valuations on overall portfolio exposures, and some higher hazard risks required more subscribers to complete,” it says. Underwriting discipline remained strong in the third quarter across the wider commercial insurance market. “Robust, quality underwriting information was a key enabler of superior renewal outcomes, but insurers sought growth and expanded their appetite in targeted areas,” says Aon. Limits trended upward in line with inflation-driven exposures increases and loss costs, while deductibles were generally stable. Coverage terms were also generally stable but exclusions remained for terrorism, cyber, war and sanctions, political violence and communicable disease. Territory restrictions for Ukraine, Belarus, Russia and Myanmar continued. Most lines of business were described as moderate, with the exception of the “challenging” cyber market. But even in cyber, market conditions continued to moderate in Q3 as appetite strengthened and new capacity entered the market, says Aon. “Cyber price increases continued but decelerated – the extent of which varied by risk complexity, class of business, year-over-year improvement of controls and previous adjustments. Underwriting rigour remained high and keenly focused on minimum information and operational technology security controls, with mature risks experiencing a more favourable underwriting environment,” adds the broker. It says that global liability market conditions remained stable in the third quarter. Rate increases continued but tended to be more modest where exposures had grown and performance was strong. Capacity was sufficient, although constraints were experienced for some risks, such as US exposure or environmental, and certain coverages including product recall. Market conditions remained favourable for D&O buyers, with expanded insurer appetite and competition in the primary space, says Aon. Trade credit buyers, meanwhile, enjoyed generally moderate conditions.

Two-tier market in play despite more stability for many buyers: Aon

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