UK property market stabilising with prices up between 1% and 10%: Aon

Aon has told Commercial Risk that the UK property insurance market continues to stabilise, with buyers facing average rate increases between 1% and 10%, and less impact on the primary space from tough reinsurance renewals than expected. The broker currently expects the market to remain stable for the rest of this year. Aon added that UK casualty buyers are operating in a stable market but average rates are up between 2.5% and 5% amid inflationary pressures. It expects things to remain stable this year with single-digit price increases. Joshua Webb, head of property, UK retail at Aon Commercial Risk Solutions, said the UK property insurance market has “continued to stabilise”. “There remains a broad average single-digit price increase, with capacity being sufficient to meet most clients’ needs,” he said. “There is, however, a growing divergence of conditions, driven by a number of factors. New entrants, growth targets and increased competition are driving improved outcomes for ‘softer’ occupancy risks,” he explained. But Webb said things are more challenging and unpredictable for tougher occupancy risks and those with significant nat cat exposures. He said property price increases tend to remain between 1% and 10% for the majority of UK clients but there have been results above and below this band. The broker added that difficult treaty reinsurance renewals have had some impact on the market “but perhaps less than expected thus far in 2023”. There is evidence of more pressure for pricing correction on excess capacity, said Webb. “Broadly, a split market for pricing is emerging. Key factors driving these varied outcomes are occupancy, insurer results, insurer growth targets, risk quality and information levels and the level of competition,” he continued. Webb explained that property capacity “broadly remained sufficient” to meet the needs of most clients. “Again, there is clear evidence of a split market, with ample capacity often the case for lighter occupancies but remaining a challenge for the heavier sectors – such as food, waste, heavy industry and energy. Some of these pockets of capacity challenge are being offset by both new entrants and insurers looking for growth,” he said. Property coverage remains more stable than recent years, continued the broker. However, there are areas of focus for insurers. “These include strike riot civil commotion (SRCC), nat cat – both primary and secondary perils, both US and rest of world – and contingent business Interruption extensions. Increased scrutiny is being driven by treaty renewals, industry losses and the need for insurers to monitor accumulation of exposure. In general, there remains more potential for consensus in coverage with insurers relative to recent years,” said Webb. He expects the UK property market to remain “broadly stable” for the rest of this year but stressed the situation remains unpredictable. “The development of almost a split market is expected to continue. Where growing competition and new entrants dominate, results are likely to outperform the market average. However, delayed impact of treaty results, nat cat exposure, excess layer pricing and heavier occupancies are challenges that we expect to remain,” said Webb. Moving on to the casualty market, he said that overall conditions are stable for insurance buyers. He said there is competition for the right risks driven by new entrants to the market, the continuing movement of underwriters between carriers and ambitious insurer growth targets. Webb explained that rate increases of between 2.5% and 5% are still being sought across the board for casualty risks on the back of the current inflationary environment. However, rate increases are being tempered by the competitive marketplace, he continued. “Risks with US exposures are subject to higher increases, in particular those with large US auto fleets,” said Webb. He added that existing liability insurers and new market entrants are both in growth mode so capacity is available for the right risk. Webb noted that insurers remain more cautious on certain complex exposures leading to limited capacity in these areas. Insurers are reviewing capacity on US risks and in some cases are pulling back due to concerns around large US court awards, explained Webb. “PFAS is the key product concern, with most insurers requiring details of any exposures with a view to exclude in the longer term. US Auto attachment points are under scrutiny by insurers, especially for clients with large fleets. Russian/Belarus exclusions remain. Otherwise, coverage remains stable,” he said. Webb expects the casualty market to be broadly stable in 2023 with single-digit increases applied. He added that things will be more difficult for clients with US or tough exposures. “Competition for the right risk is evident and will continue to increase as new and existing carriers look to meet their growth targets,” said Webb.

UK property market stabilising with prices up between 1% and 10%: Aon

Casualty rates increasing in 2.5% to 5% range

Want to read this article?

Read Next

Risk managers taking centre stage in ESG

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate, not exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Markel ‘reinforces commitment’ to Chinese market

Risk managers taking centre stage in ESG

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate, not exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Markel ‘reinforces commitment’ to Chinese market

Want to read this article?

Read Next

Risk managers taking centre stage in ESG

Costs rapidly rising for employee health insurance in Portugal

UK market must innovate, not exclude emerging risks: BIBA

EC probes Meta for alleged breaches of Digital Services Act

Markel ‘reinforces commitment’ to Chinese market

Related Articles