Q1 Trends by Line of Business

Automobile

Inflation and supply chain disruptions continued to drive up loss costs. Innovations and new technologies continued to modify risk profiles, as well as underwriting and pricing approaches. While the environment was competitive, modest rate pressure continued.

Cyber

The cyber landscape remained volatile in in the first quarter. Complex cyber losses continued to develop with multiple severity cases compounding on large events that occurred in recent years, while the frequency of claims remained relatively constant year-on-year. Waiting periods for Business Interruption related coverage (e.g. Systems Failure Business Interruption, Dependent Business Interruption) increased. Ransomware co-insurance provisions, ransomware sub-limits, and sub-limits for Business Interruption, Systems Failure Business Interruption, and Dependent Business Interruption were introduced in certain client and industry segments, or when risk controls were deemed by insurers as insufficient. Insurers scrutinized the coverage offered for critical infrastructure, systemic, correlated events and restricted coverage on either a generalized or event specific (e.g., Log4j) basis. Insurers actively managed their global aggregate capacity and in some cases reduced limits offered. The underwriting process continued to gain rigor. For additional details, see Aon’s 2022 E&O and Cyber Market Review.

Casualty/Liability

Measures taken by insurers to address rates and capacity generally stabilized, with some exceptions such as risks in challenging industry classes (e.g., pharmaceuticals), difficult exposure types (e.g., wildfire, sexual abuse, climate change, chemical compounds), material claims activity, and US-domiciled/exposed risks (on non-US placements). The impacts of social inflation continued, and high-limit capacity remained constrained.

Employers Liability/Workers Compensation

Coverage and pricing were generally stable in this highly regulated product. Insurer appetite and underwriting approaches varied widely from country-to-country and based on client industry sector, risk performance, and insurer growth targets.

Directors and Officers

While insurer profitability has been positively impacted by recent pricing increases and active insurer management of retentions and limits deployed, further adjustments - although less severe - continued in Q1. The market remained challenged for newly public companies (via IPO/de-SPAC), difficult industries, and US-listed companies which are foreign domiciled, and an increase in regulatory enforcement has been observed globally. While underwriting scrutiny remained high, some underwriters demonstrated flexibility in areas where they had recently imposed restrictions. Minimum Increased Limits factors decreased on excess placements.

Property

Poor loss performance stemming from myriad factors including an increased frequency of catastrophic weather events, the impact of supply chain disruptions on the cost of construction materials, labor shortages in the construction and transportation sectors, and high inflation continued to challenge the market. In addition, property valuations remained a key concern. However, past corrective actions positively impacted insurer performance, attracting new capital and serving to moderate market conditions for most risks, with the notable exceptions of higher-risk industry sectors, loss-impacted programs, or where risk management and progression was not evident.

Trade Credit

Claims performance remained favorable relative to expectations, and the market improvement trend that began in late 2021 continued in Q1. Insurer appetite continued to strengthen as insurers focused on profitable growth; however, caution remained high on vulnerable and distressed risks (e.g., those continuing to suffer the impacts of COVID). Insurers closely monitored the inevitably profound and long-lasting impacts of the geopolitical events in Eastern Europe. For additional details, see Aon’s Q1 Credit Solutions Report.

Regional Insights

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