Geography Trends
Global Broking Centre
Market Dynamics
Rates Price increases have decelerated markedly with the majority of classes now experiencing only modest rate increases.
Capacity Existing insurers are deploying capacity selectively and cautiously while innovation and modernization initiatives have delivered new capacity and digital solutions to the market.
Underwriting Heightened underwriting rigor supports insurer emphasis on risk selection. ESG, renewables, and green energy are high priorities for appetite expansion.
Limits Following some volatility in recent years, limits have generally stabilized; “as expiring” limits can be achieved on most placement types with the key exceptions of Cyber and Environmental.
Deductibles Insureds’ use of deductible increases as a premium saving mechanism has become less common.
Coverages Expiring terms can be achieved in most cases; however, Communicable Disease, Non-Damage Business Interruption and Cyber exclusions continue.
Claims Dynamics
Overall, general claims activity remains high across all lines of business linked to issues related to the pandemic and recent CAT activity.
Shifts in market appetite are having downstream impacts. Smaller insurers are moving into lead positions with greater frequency, leading to more coverage questions and pressure at various points in the system.
Increased Aon involvement: Uptick in general coverage questions being referred to market, and Aon’s engagement is greater as a result. Whether this is a general increase in complexity or the consolidation of key adjustment firms, with now a clearer directive from insurers to refer such matters is difficult to quantify/compare.
Complex loss trends: Engagement with lawyers on complex losses is becoming commonplace, with majority being behind the scenes, assumingly to support consistency across a portfolio. This can be a driver to slow down the process.
Re-insurer activity: In the first party space fronting arrangements are becoming more time consuming, as reinsurers are taking a more active role, adding to complexity and cycle time, which is not necessarily coverage related.
Global Broking Centre Featured Products Q3 2021
Q3 Casualty/Liability Summary
Overall (Stable) Market conditions are moderating. While rate increases continue for most risks, there has been a notable deceleration. Capacity continues to stabilize.
Rates (+1-10%) Modest rate increases have taken the place of the more significant rate increases that had been imposed over the past two cycles.
Capacity (Ample) New entrants to the market have helped to offset the capacity cutbacks of many existing insurers. Capacity is sufficient for most risks.
Underwriting (Prudent) Underwriters remain focused on managing their exposure through careful control of terms, especially related to wildfire, communicable disease, cyber, sexual abuse and certain chemicals.
Limits (Stable) Following reductions in overall limits purchased over the last two years, most insureds are now maintaining their expiring limits, which are generally available in today’s marketplace.
Deductibles (Stable) Deductibles remain flat. Insurers are seldom imposing increases; however, insureds are considering increases to help offset rising premium costs.
Coverages (Stable) Coverages remain fairly stable; however, there is scrutiny related to wildfire, communicable disease, cyber, sexual abuse and certain chemicals.
A Look Ahead (Stable) As most insurers are at or near pricing equilibrium following a prolonged period of challenging market conditions, the market is expected to continue to stabilize.
Q3 Cyber Summary
Overall (Challenging) Q3 was the most challenging quarter the Cyber market has experienced to date.
Rates (>+30%) The continued deterioration of loss ratios – stemming primarily from the continued proliferation of ransomware – has led to complete, thorough reviews of many insurers’ Cyber portfolios. Consequently, risk selection has become far more stringent and minimum risk standards are being established.
Capacity (Constrained) Available capacity has materially contracted in 2021 as insurers focus on managing their exposure and Lloyd's underwriters look to manage their stamp capacity.
Underwriting (Stringent) Risk selection is rigorously scrutinized, increasing the importance of providing thorough and complete underwriting information. Where minimum standards of risk controls and governance cannot be demonstrated, many insurers will simply refuse to quote (whereas, in the past, less favorable terms may have been provided under these circumstances).
Limits (Decreasing) With the exception of the very largest towers, total expiring limits can be achieved for most programs. Most insurers; however, have reduced their line sizes, creating the need to introduce new capital to replace them.
Deductibles (Increasing) The trend for insurers to increase retentions is gaining momentum, especially on new programs. In addition, many insureds are now seeking to increase retentions in exchange for relief on primary rate. Captive utilization is increasing as retentions increase.
Coverages (Restricting) Many insurers are sub-limiting ransomware coverage. In addition, at least one global insurer has redesigned their primary offering to remove, up front, systemic exposures, with a buy-back option.
A Look Ahead (Challenging) There are no indications of a reprieve in current market conditions.
Q3 Crisis Management - Recall Summary
Overall (Stable) Product Recall insurers are focused on improved risk selection through more rigorous underwriting practices. On the automotive recall side, airbags, electric vehicle batteries and new technologies are experiencing diminishing market appetite. On the food/drink contamination side, there is minimal appetite for ingredient manufacturers due to the vast amount of products the ingredient could form a component of and the exponential risk exposure of the finished product relative to the cost of the ingredient.
Rates (+1-10%) Pricing is up modestly across all products. Product Recall rate increases are largely dependent on sector and size of company. Automotive Recall rate increases are largely dependent on product type. Food and Beverage contamination rate increases are largely dependent on size of company and product type.
Capacity (Constrained) Automotive Recall capacity is tightening due to increased loss severity and frequency emanating from new technology which has caused insurers and reinsurers to re-evaluate their risk appetite. At the same time, risk size has also changed from small component part manufacturers to large tier-one manufacturers that require much higher limits to cover their exposure. Food and Beverage risks are experiencing stable capacity.
Underwriting (Stringent) Product Recall insurers are focused on improved risk selection through more rigorous underwriting practices. Insurers have become less reluctant to walk away from risks – even if they are the incumbent - if target pricing or retention amounts cannot be achieved.
Limits (Increasing) Most insureds are reviewing their exposures and increasing their limits to protect their balance sheets.
Deductibles (Increasing) Insurers are requiring higher retentions, particularly for firms that have grown substantially since the retention amounts were established.
Coverages (Stable) Expiring coverage terms can be achieved for most placements.
A Look Ahead (Stable) Innovation will continue – both in the nature of the risk, particularly automotive risk, and how it is managed.
Q3 Crisis Management - Terrorism & Political Violence (TPV) Summary
Overall (Stable) The market remains competitive, driven by historically low loss ratios, and insurer growth expectations. Insurers remain highly supportive of Aon-led facility solutions (ie., Aon's Alpha Terrorism facility), as well as the open market portfolio. There is an increased demand for Terrorism and Political Violence (TPV) coverages, in response to heightened exposure and improved awareness of the available solutions. Where TPV losses occur, insurers are quarantining them by industry and local geography, moderating the global impact on insureds.
Rates (Down) In general, rate reductions have decelerated, though rating remains down, with the notable caveat of loss-impacted risks and/or increased threats.
Capacity (Abundant) Capacity to date has been abundant, due largely to two factors: portfolios have performed well historically, and there is increased demand for standalone Strikes Riots and Civil Commotion and Political Violence coverages.
Underwriting (Flexible) Aon strategies to deliver solutions and client value to previously in under-served geographies and industries are being broadly supported by insurers who are relying more on technical underwriting, which enables informed risk decisions.
Limits (Stable) Existing limits are maintained in most cases and insurers are increasingly prepared to offer higher limits on the same/similar risks, dependant on occupancy, threat, loss history and other factors.
Deductibles (Stable) Existing deductibles are maintained in most cases.
Coverages (Stable) Existing coverages are maintained in most cases; however, insureds experiencing unanticipated impacts related to strikes, riots, and civil commotion or political violence are considering coverage expansions.
A Look Ahead (Stable) Wider industry volatility has driven the need for more technical underwriting. In Q4 and 2022, risk is expected to increase as the world emerges from COVID restrictions. Increased threat is expected to impact pricing, irrespective of loss activity. Reduced appetite amongst Property insurers for Strikes Riot and Civil Commotion and Political Violence is expected to drive more insureds to purchase stand alone solutions, and as a result, new entrants are expected to shift into a forward leaning posture, driving competition and improvements in rate, appetite and capacity. Participation in facilities & structured portfolio solutions will remain an attractive cost-effective option.
Q3 Environmental Summary
Overall (Stable) The market remains competitive and active although insurers remain sensitive to the type of risk and coverage required.
Rates (+1-10%) Modest rate increases have become the norm, after years of significant rate pressure.
Capacity (Constrained) Capacity remains under management review for several insurers, and contractions continue in this space.
Underwriting (Stringent) Quality and robustness of underwriting information has always been critical for Environmental coverages and its importance has been amplified in 2021 due to a heightened focus on emerging contaminants and regulatory changes.
Limits (Decreasing) Insurers are managing limits deployment and have become more conservative on primary and lead placements, particularly for poor performing risk types.
Deductibles (Increasing) There is a growing trend for insurers to require deductible increases, especially for challenging risk types and on high primary limit placements.
Coverages (Restricting) While basic coverages remain unchanged, underwriters are restricting coverage through the application of restrictive endorsements and demonstrating less flexibility, even on site/risk specific placements.
A Look Ahead (Challenging) The ESG agenda, climate change driven weather events, ubiquitous pollutants such as PFAS/PFOS - together with increasing environmental awareness – is expected to continue to increase interest in Environmental coverages and require innovative solutions to meet rapidly evolving needs.
Q3 Financial Lines Summary
Overall (Challenging) The market is challenged but has moderated somewhat, driven largely by new capacity and ‘de-risking’ that occurred in past underwriting cycles.
Rates (+11-30%) Rate increases still dominate this class, but have decelerated notably from 2020 and early 2021, driven by a number of new entrants in this space and greater market competition.
Capacity (Ample) Available capacity for Financial Lines in the London market has increased throughout 2021.
Underwriting (Prudent) During the course of 2021 it has become increasingly apparent that the 'de-risking' exercise is complete for most insurers who are now focused on portfolio growth through the acquisition of new clients rather than relying solely on rate increases.
Limits (Stable) Limits have stabilized following the significant reductions that occurred over the past 12 months, driven by both lack of available capacity and the substantial increase in the cost of capacity. Deductibles (Stable) Expiring deductibles can be achieved in most cases.
Coverages (Stable) Silent Cyber has been a continued challenge throughout 2021 and insurers continue to scrutinise coverage. Areas of additional focus include investigations cover, entity cover, insolvency, anti-money laundering, discovery periods and broadening existing exclusions.
A Look Ahead (Stable) Soft market conditions are not likely in the near future; however, most insurers already 'reset the dial' in terms of correction of portfolios and are expected to focus on growth, albeit, in a selective manner.
Q3 Property Summary
Overall (Stable) Challenging market conditions are giving way to a gradual stabilization, following a prolonged period of poor performance which led to remediation efforts focused on pricing adequacy and coverage clarifications.
Rates (+1-10%) Relatively modest rate increases have become common.
Capacity (Ample) Existing insurers in this space are deploying capacity selectively and cautiously; any reductions are offset by new entrants.
Underwriting (Prudent) Underwriting is focused on profitability over top line growth. A focus on robust, quality risk information remains paramount.
Limits (Stable) Insureds are evaluating limits and some are taking advantage of more favorable market conditions by increasing limits.
Deductibles (Stable) Expiring deductibles can be achieved in most cases; however, some insureds are requesting options for increasing retentions to create premium savings.
Coverages (Restricting) While coverage remains generally stable, some insurers – partly driven by COVID-19 related claims - are restricting non-Physical Damage Time Element extensions.
A Look ahead (Stable) A moderate pricing environment is expected for the remainder of 2021 and into 2022. Flat pricing may be achievable for some well-performing risks. The focus on Non-Physical Damage Time Element will continue.
Q3 Trade Credit Summary
Overall (Stable) Stable market conditions continue, with moderate pricing, sufficient capacity, and some insurers offering up to 15-18 years on project finance deals and ECA backed transactions, which matches the investor project exit horizon.
Rates (+1-10%) Rates are increasing modestly, driven by individual risks and country aggregates.
Capacity (Ample) Appetite and capacity has expanded as the economy has reopened and many sectors’ performance rebounds. In some cases, available capacity now exceeds pre-pandemic levels.
Underwriting (Prudent) Extensive due diligence continues, given the complex and sensitive nature of transactions.
Limits (Stable) Limits are stable and driven by client requirements.
Deductibles (Stable) As loss performance remains strong, most underwriters are imposing deductible increases only on a risk-specific basis where deemed necessary.
Coverages (Stable) Coverage remains stable with one key change: Communicable Disease Exclusions are being applied to some placements.
A Look Ahead (Stable) The market is expected to continue to innovate, particularly around renewables and structured credit opportunities.