Global Market Overview
Improved market conditions are on the horizon. Rate increases are decelerating and there are signs of equilibrium (e.g., the D&O index has nearly returned to its 2003 state). Insurers are looking to regain share of classes of business they deem profitable. A focus on growth is emerging.
New capacity continues to flow in. Capital is coming from traditional markets, de novo markets, bolt-on capabilities, and other sources.
Traditional broking has become more innovative and symbiotic. Experts are collaborating across risk, consulting, actuarial, reinsurance, health, retirement, investments, etc. to support risk assessment and quantification, risk financing decisions, captive feasibility evaluation, exploration of alternative capital, and other out-of-the-box options and solutions.
COVID-19 continues to impact buying decisions. Some businesses - particularly smaller businesses - continue to suffer from economic stress due to the pandemic and are taking a hard look at insurance (coverages, limits and deductibles) as a place to cut costs.
The environment is complex and dynamic. New entrants have provided some capacity relief. Talent shortages and resource pressures continue, partly related to the ongoing pandemic situation. Decision-making continues to be held by central teams. New technologies are being introduced to support product innovation, underwriting and trading.
The market is less stressed. Insurers continue to shift from portfolio remediation toward growth – with an emphasis on profitable growth. Premium increases have decelerated; however, some areas remain challenged, such as Directors and Officers Liability, Professional Indemnity, Cyber, CAT-driven Property placements, or those with contingent business interruption exposures, as well as risks in the food, energy or waste processing industries. The market is starting to align on wordings. While insurers continue the process of rationalization of wordings and clauses within their portfolios, they are becoming more flexible in aligning across placements.
The market, although still challenging, is starting to plateau for some lines of business. Rate increases and coverage restrictions continue, but with less intensity, except in areas such as Energy, Power, Directors & Officers, and Cyber, as well as for loss-active or poorly managed risks, which continue to experience a continuation of very challenging market conditions. For such risks, alternative risk transfer methods such as captives continue to be explored.
The transition to centralized underwriting is creating opportunity for local insurers who are, in some cases, able to offer better solutions as a result of their local market understanding and relationships.
Claims delays and negative responses remain a key concern. Longer analysis times and narrow interpretations of policy language are leading to lengthy debates and challenging discussions with insurers, and therefore recognition of claims coverage is taking longer. Loss adjusters have become more active in the definition of claims, including coverage definition.
Risk volatility is creating greater need for risk assessment and quantification. More and more insureds are looking to Aon for support in understanding, quantifying and managing their exposures and risk volatility. Aon relies upon data and analytics to advise insureds, and to work with insurers to structure custom solutions for clients.
Internal disconnects are emerging within some insurers. Insurer growth strategies are taking time to translate into new underwriting practices, especially considering the prolonged period of remediation focus. This will likely take some time - and patience - to work through. In the meantime, growth expectations of insurers will be challenged by underwriting teams fearful of writing too close to underwriting guideline boundaries.
Market conditions are improving – but in pockets. Rate movement in some areas is starting to ease, particularly for the more vanilla occupancies and exposures, well-managed risks, and risks with a low Natural Catastrophe footprint, while other areas such as Cyber, Professional, and complex Property, remain very challenged. There is also a growing disconnect between rate requirement for large limit capacity and lower limit purchase with the former remaining far more challenged.
Data Loss language is improving. In response to the widespread adoption by underwriters of “Silent Cyber Endorsements” (exclusions) - which were deemed by the industry at large as overly broad, and which had negative consequences for many insureds - Aon has been at the forefront of working with local and global underwriters to redraft Data Loss language. This is an important area, and Aon is gaining momentum in providing clients with much needed clarity.