Q1 Regional Insights

North America

Q1 2022 insurance market conditions followed the general improvement trend which gained momentum throughout 2021. Although in Q1 rate increases continued to generally decelerate, premium levels grew as exposures increased.
Underwriting rigor continued to strengthen, especially in the Cyber space where insurers were hyper-focused on ransomware controls. If underwriting information was insufficient or did not demonstrate satisfactory risk management, some insurers declined to quote or would offer coverage only with sub-limits or coinsurance.
Insurers – especially, Political Risk insurers – closely monitored their exposures in Eastern Europe and most paused new coverage for related risks. In addition to potential direct impacts, the market watched closely for potential ripple effects. In addition, underwriters scrutinized political violence risks such as civil unrest and violent protests, which continued to cause concern in many parts of the world.
The need for solutions related to emerging risks such as supply chain and climate change continued to grow, and Aon partnered with insurers and clients to co-create innovative solutions.

Q1 market conditions remained firm, but with pockets of more favorable conditions, depending on geography, client segment and product.
The SME market experienced healthy competition in virtually all products and classes of business.
Cyber, Directors & Officers, and Energy were among the products / industries that continued to experience significant capital constraints and coverage restrictions.

While rate increases have decelerated across the majority of classes, the much-purported peak of the hard market, and inevitable decline into a softening trend, has not yet fully materialized.
Concerns related to the Ukraine crisis, COVID impacts, inflationary pressures, social inflation, reinsurance cat costs, as well as a continued drip feed of relatively large losses in recent months have continued to impact the market. This has meant that while most classes saw only single digit rate increases, rate decreases remained relatively rare.
As a result of the Ukraine-Russia crisis, insurers actively assessed portfolios (e.g., war exclusions), supply chain risks, and the impacts of sanctions.
Cyber continued to be the most challenging line of business, experiencing a further reduction in capacity and an increase in pricing and the application of exclusions.
Underwriters continued to incorporate additional data points into the underwriting process to better manage risk profiles. At the same time, insurers invested in the development of alternative risk transfer solutions such as captive fronting and parametric solutions

As market conditions stabilized for some short tail lines, some long tail coverages such as Cyber, Construction Professional Indemnity, Financial Institutions Professional Indemnity, Bushfire Liability and Sexual Misconduct became ever more challenging. As insurer focus returned to growth in many segments, the gaps in insurer appetite and pricing between targeted and out-of-scope risk types have grown ever wider.
Digital transformation continued to progress quickly, introducing opportunities for insurers to partner with Aon and clients to innovate new policies and solutions and bring more sources of capital into the market.
In response to the events in Eastern Europe, insurers sharply reduced Terrorism / Political Violence capacity and imposed significant rate increases.
Significant flood losses in Australia will impact 2022 profitability and drive increased reinsurance costs going forward (Estimate >$4bn of claims). Concerns increased in Q1 around availability of builders and materials in an already stretched supply chain. Impact on Business Interruption loss amounts would not ordinarily be a consideration. Availability of loss adjusters was a growing concern.
The focus shifted toward the Cyclone Reinsurance Pool which comes into effect mid-year. While designed to assist in pricing for Personal Lines clients, there will likely be a far reaching impact on corporate clients as insurers amend RI purchase and strategy across their portfolios.