The London market transformed into a virtual market during March 2020, shifting from predominately face to face to a more technology-enabled trading marketplace, adding to history's examples of progress emerging from adversity. Existing electronic platforms such as Placing Platform Ltd (PPL) made this technically possible. The part that surprised most was how broker and underwriter trading relationships moved relatively seamlessly from Lloyd’s and London offices to kitchen tables, spare bedrooms, and (for the lucky ones) home offices. Based on client feedback, the quality of service may have actually improved.

Video conferencing platforms meant communication between clients, brokers, and underwriters has, for most, been enhanced. Trading days on average have become longer/stretched out because of market conditions, and the new ease of communication has increased interactions, particularly for teams handling global portfolios. The human ability to adapt has created this pragmatic and workable solution, as in many industries. However, the consensus is it is not sustainable for a market with innovation and in-person collaboration at its core. We discuss how the market could retain the best of the changes post-vaccine and how a new London market trading environment may evolve in the COVID-19 section of this report.

Market trends

Trading practice changes were more remarkable because they were achieved against a backdrop of the hardest property and casualty market in twenty years for most sectors. Placements needed more carriers, longer negotiation, and a greater variety of structure options for clients to weigh up, most of whom were facing very challenging financial conditions in their own industries.

The tables in figures 1-4 record the risk-adjusted rate change ranges for loss free/capacity surplus and loss active/capacity constrained sector accounts during Q4 2020 and 1 January 2021 renewals. There were few capacity constrained property placements, but for casualty, it is a growing theme. Our broking leaders discuss the drivers behind the major trends and offer 2021 forecasts for each of the four main risk classes and industry sectors in the body of the report.

Fig 1: International property

Fig 2: US property

Fig 3: International casualty

Fig 4: US casualty

Our expectation is current trends for property rates will continue, subject to natural catastrophe level influences, but with possibly slowing momentum from mid-year. For casualty, our read of underwriting appetite and capacity availability signals there is comparably more upwards momentum left, particularly for the largest US casualty programmes and higher-risk international industry sectors.

Talent, inclusion & diversity

With increased account and premium volumes traded in the London market (Aon data is provided in this report), coupled with new carrier and broker start-ups, competition for talent is at record levels. Many areas have more open roles than there is available talent, and not just in specialist areas. In P&C sectors with relatively deep talent pools, demand now outstrips supply.

London has made significant strides on the inclusion and diversity front. In Aon’s experience, this more agile and creative workforce has stepped up during 2020, successfully filling parts of the talent supply and demand gap. Talent management is now viewed as the principal differentiator between capturing the hard market opportunity and missing out. We include a view from Aon’s HR team on where the London market is on this important subject.

Climate change and environmental social governance (ESG) issues

While pandemic catastrophe was naturally the focus during 2020, natural catastrophe losses were above average. The continued increase in wildfire losses and the record number of windstorm events reminded carriers that prior experience is no longer an accurate guide to the future due to climate change.

ESG considerations have risen on every companies’ corporate agenda. Particularly for the energy and metals and mining sectors, the environmental profile of companies can now have a direct bearing on capacity availability and insurance costs. We look at what companies need to do to prepare for these discussions.

Technology and data & analytics?

The current limitations and future potential of both technology and data have never been the subject of broader or richer debate. There is a palpable sense that the market is now entering a period of evolution, with data and technology being major catalysts.

Data is at the heart of Aon Client Treaty, which was successfully renewed at 1 January 2021, handling a major step up in deal flow and premium volume during 2020. Clients increasingly valued the guaranteed follow market capacity it provided in tough market conditions. Many carriers are investing heavily in digitalising their product offering and matching capital with lower cost underwriting models to gain competitive advantage. Brit’s Ki syndicate is the leading example, with others in the pipeline.

We view this as necessary for London to continue to thrive and where broker and carrier collaboration can bring transaction costs down for the benefit of all stakeholders. Our Data and Analytics team offers insights on the latest developments.

Thank you

We hope you find the report of interest and it supplements your understanding of the major market themes and trends. On a personal note, I wish to record my appreciation of the extraordinary support from our clients and the carrier community, along with my Aon colleagues' dedication through a momentous year. 2021 must be better, when we very much hope to see you in person.

Mark Parker Head of Property, Casualty & Crisis Management

01 London market post COVID-19