Renewals see ‘steady improvement’ – Aon Q2 insights report

Aon’s Global Insurance Market Insights report for the second quarter has provided snapshot of re/insurance trends, including renewals, natural catastrophe activity and capacity availability. 

Reinsurance renewals “have seen a steady improvement”, re/insurance broker Aon said.

At the mid-year point, the broker saw increased capacity and reinsurer appetite leading to rate reductions for property catastrophe risk, and improvements in terms and coverage.

Natural catastrophe insured losses remain volatile while adverse reserve development and social inflation make for an uncertain casualty outlook, the broker said.

Meanwhile, “material deterioration” in casualty loss trends, and outsized nat cat losses could materially impact future insurance and reinsurance market dynamics, said the intermediary.

Aon described “a capacity-rich market” focused on sustainable growth and programme stability that was “good for our clients”.

“Many of whom”, the broker added, “are taking advantage of the current market conditions by restoring coverages and limits that had been reduced during recent renewals.”

Joe Peiser, global CEO of commercial risk at Aon, said: “The insurance market in Q2 2024 remained growth-oriented yet disciplined as insurer strategies focused on underwriting and pricing for longer-term profitability and programme stability.

“Insurer growth ambitions continued to translate into a competitive, well capitalised market environment characterised by continued price moderation, underwriting flexibility, and the availability of coverage options,” he added.

Pricing and capacity

Driven by strong insurer results, the broker noted an emergence of insurer growth plans, healthy competition and an expansion of capacity, price reductions were applicable to a wider area of the market.

In addition to financial lines, price reductions were available in the second quarter for property and casualty placements, while directors’ and officers’ liability (D&O) and cyber placements saw the greatest reductions, according to Aon.

There remained some areas where flat pricing or reductions were less common, Aon acknowledged.

“These included automobile insurance, certain industry segments, loss impacted programmes, risks with poor risk quality and specific perils within each individual class,” Aon said.

Second quarter capacity was sufficient to meet the needs of the majority of clients, Aon reported.

This was driven by an increase in availability from both direct insurers and reinsurers across most areas of the market, the broker said.

“Established, growth-focused insurers sought to expand their available capital, and new market entrants became available to supply new capacity,” Aon added.

Underwriting dynamics

Underwriting “continued to become less rigorous and more flexible”, Aon suggested, with the extent of this varying by class and individual risk.

This was driven by improved insurer results, Aon said, reduced head office control, greater country level control, ambitious insurer growth targets and growing competition in some parts of the market.

Meanwhile, expiring limits were available for most placements, the broker noted, although some clients took advantage of current market conditions by increasing their limits.

On deductibles, after seeing increases during recent renewals either imposed by insurers or sought by insureds seeking to mitigate premium increases, Aon noted that expiring deductibles were available for most second quarter placements.

Expiring coverages were available for most placements, Aon said; however, enhancements could be achieved for some risks as market conditions continued to soften.

“Despite more favourable general conditions, insurers continued to monitor pockets of coverage across a number of classes,” Aon said.

Product Trends

“Challenging pockets” included heavy industry segments, such as waste industry business, Aon said.

Loss impacted risks were part of these pockets, he broker said, as well as coverage for nat cat property, strikes, riots and civil commotion, and contingent business interruption.

For motor / automobile business, Aon noted this was driven by continued profitability challenges and rising costs, market conditions remained moderate-to-challenging relative to other products, and modest price increases continued.

Capacity was sufficient for most placements, “but not abundant”, the broker said.

“Electric vehicles remained a key area of focus from a pricing, coverage and appetite perspective,” Aon said.

“Superior outcomes were achieved through close and early insurer engagement and on risks demonstrating strong risk management,” the study said.

For casualty / liability business, Aon said insurer growth focus and strong results had led to a softening in the market.

In the second quarter, “competition was fierce for in-appetite risks”, the broker noted.

Pricing for liability business was “flat to modestly down”, the broker said.

“However, US-exposed risks – especially those with large US auto fleets – and risks with complex exposures, experienced price increases. US exposures remained a key underwriting concern and attachment points were scrutinised,” Aon said.

Appetite for complex risks was dependent on rate adequacy, according to Aon, with PFAS remaining a key product concern; however, insurer approaches for handling it varied widely.

Insurers required client disclosure of exposures to determine whether an exclusion was required, Aon noted.

Cyber insurer growth targets and healthy competition created favourable conditions, Aon said, with rate reductions available across all client segments and opportunities to enhance coverage.

Capacity was sufficient for most cyber placements, Aon said, while quality information and structured insurer engagement remained key to optimising renewal outcomes.

The D&O market remained soft, Aon said, with continued price reductions, coverage enhancements, and limit increases available.

Capacity “was abundant”, the broker said, from both established insurers and new market entrants.

Property business, after a period of moderation, saw softer market conditions emerged and second quarter rates hovered between flat and modestly down, Aon said.

Greater reductions were available in areas targeted for insurer growth, the broker said, with capacity increased from both the direct and reinsurance market, sufficient for most placements.