Q2 Trends by Line of Business
Automobile
High repair costs, driven largely by inflation, together with increasing accident frequency and rising settlement values created a moderate-to-challenging environment as insurers remained focused on achieving profitability through selective underwriting and price increases.
Casualty/Liability
The market remained stable despite continued social and claims inflation, with ‘targeted’ versus ‘non-targeted’ risks experiencing divergent market conditions. Challenging risk types, US-exposed risks (on non-US placements), risks with adverse loss experience and programs with low deductibles or attachment points experienced stringent underwriting, tight capacity and price increases, while lower-hazard and well-performing risks experienced more moderate, and sometimes favorable, market conditions. Insurers remained focused on critical and emerging risks including biometric privacy, forever chemicals (e.g., PFAS), diacetyl, wildfire, and Traumatic Brain Injury, and looked closely at the treatment of defense costs. The trend to require increases to US Automobile Liability attachment points (for multinational risks) continued. Creative solutions and alternative forms of collateral proved valuable as economic uncertainty continued.
Cyber
Insurer loss ratios improved and new capacity continued to enter the market, perpetuating the softening trend experienced in Q1. Insurers increased line sizes, expanded appetite and removed some restrictive terms applied during recent past renewals. At the same time, underwriting remained rigorous, and focused on risk maturity and controls, with particular attention to biometric information collection and disclosures, Operational Technology, Supply Chain Risk, and the geopolitical environment in Eastern Europe. Insurers continued to scrutinize coverage offered for critical infrastructure, systemic, correlated events, and impose restrictions on either a generalized or event specific basis. For non-IT dependent business interruption/system failure, certain insurers imposed sub-limits, added co-insurance provisions or in some case were no longer willing to provide coverage.
Directors and Officers
Pricing continued to decrease. Abundant capacity and a more stable securities litigation environment served to create competitive market dynamics for most clients. However, the increase in new insurers entering the D&O marketplace decelerated markedly. Insurers remained focused on economic uncertainty, ESG, cyber, inflation, geopolitical risks, and ongoing supply chain challenges. Aon closely monitored new regulatory disclosures rules related to cyber and climate.
Marine
Market conditions remained generally stable. After plateauing in 2022, the Hull market has experienced a slight softening driven by increased competition, especially from the London market. Underwriting rigor has increased for fishing and RoRo/passenger vessels sectors, with these sectors seeing the least market appetite in a market with an abundance of appetite for the majority of other well-performing Hull risks. In the Cargo space, capacity remained ample and price increases were generally modest, even despite inflation driven exposure growth. Coverage restrictions previously imposed were re-considered. Higher risk industries such as cars, life science and retail and risks with heavier Natural Catastrophe exposure faced more challenging conditions driven largely by reinsurance. The Ports & Terminals market was focused on risk selection via rigorous and conservative underwriting of comprehensive information including contracts and survey reports. Capacity remained stable and co-insurance was prevalent. The Protection & Indemnity market experienced moderate price increases and a contraction of coverage as a result of investment losses and the impact of claims inflation.
Professional
While rising loss costs and increasing exposures pressured pricing upward, targeted new capacity entered the market which served to dampen increases, creating a moderate pricing environment overall. Risk differentiation in underwriting became more pronounced and superior outcomes were largely dependent on the quality and robustness of underwriting information including details around risk improvement measures. Use of public sources of information gained traction in underwriting, and clients became more proactive in conducting media searches to better understand what information is out there before meeting with insurers.
Property
The market divergence between ‘targeted’ and ‘non-targeted’ risks further expanded. Insurers competed to retain well-performing risks and risks in lower-hazard occupancies and demonstrated a healthy appetite for growth. Natural Catastrophe-exposed risks and risks in higher-risk occupancy types faced a more conservative, volatile, and challenging environment including limitations on appetite and capacity, as well as further rate increases driven by ongoing concerns related to inflation, reinsurance costs, climate-related events and Natural Catastrophe exposures. Alternative program structures and solutions were important levers in achieving overall program goals. Across the portfolio, scrutiny of insured values continued, with insurers applying margin clauses or coinsurance penalties where valuations were deemed inaccurate or under-reported. Underwriting rigor remained strong, with complete and updated submissions – including loss reports, valuation methodology details, and responses to recommendations – required.
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