Introduction: Proactivity is Key to Navigating Today’s Complex Risk Environment
Chris Rafferty
Global Intellectual Property Solutions Leader Commercial Risk Solutions
Intellectual property (IP) has become one of the most valuable corporate assets, yet is one of the least understood, valued and protected. Today, intangible assets – primarily in the form of IP – comprise the majority of the value of the S&P 500, yet only a fraction of those assets are protected. But as innovation, digitization and investment in technology grows, IP is becoming a cornerstone of nearly every organization and as a result Aon has seen considerable growth in demand for IP-related solutions. This has been amplified by the current economic environment (e.g., recessionary environments have historically increased IP risk) and the tightening of M&A and capital markets, which have highlighted the growing need and demand for three types of IP-related solutions:
- IP risk solutions. The growth in demand for IP risk solutions has been significant; Aon has seen a 200 percent increase in client submissions over the last 12 months. Expanded market capacity, more favorable pricing and enhanced coverages have attracted first-time IP insurance buyers across many industries.
- IP-back lending. Demand for IP-backed lending has surged over the past year, as traditional financing markets have slowed while insurance capacity has seen quarter-over-quarter growth, facilitating both higher volume and larger deals. In the past year alone, Aon has helped to facilitate IP-rich organizations in accessing more than $1 billion in capital.
- IP-related intelligence. The need for better intelligence around IP quality and risk is also accelerating, driven largely by the contracting economy. Leading investment banks are increasingly looking to Aon’s Quality of Intellectual Property Report (QoIP) to help identify, catalog and articulate their IP portfolio, bringing IP into the deal conversation and driving value in transactions.
As the IP insurance market matures, as organizations become more aware of the value of their intellectual property — both as an asset class and as a source of exposure — and as M&A market conditions demand better deal preparedness and deeper discipline, we see the opportunities and risks afforded by IP continuing to increase through the remainder of this year and into 2023.
On behalf of Aon’s Intellectual Property Solutions Management team, I am pleased to introduce you to Aon’s Q3 Global Market Insights. In this quarter’s report, we highlight key risk and insurance market trends and solutions related not only to IP, but also to the market at large. Key findings of this quarter’s report include:
- Insurers remained focused on profitable growth. Persistently high inflation combined with ongoing geopolitical instability, supply chain challenges, and climate change concerns created continued uncertainty in the market; however, increased competition paired with strong combined ratios served to dampen the impacts of these challenges. Insurers remained focused on profitable growth, and strong risk management played heavily in underwriting decisions.
- A two-tiered market became more pronounced. A two-tiered market became more pronounced across a significant portion of the market, with products and in-appetite risks targeted for insurer growth experiencing flat or decreased pricing and abundant capacity while challenging, poor-performing or out-of-appetite risks experienced material rate increases and tight capacity, although these conditions moderated somewhat from previous periods.
- Insurer conservatism strengthened. In the aftermath of Hurricane Ian, which, by early industry estimates, may amount to a $50-70B insurance event, insurer conservatism strengthened. As the full market impacts of Hurricane Ian materialize, a shift in pricing and capacity is widely expected to ripple across the primary and reinsurance market in Q4 and beyond.
Continue reading to learn more about how the risk environment continues to evolve, and the ways the insurance market responded in Q3 to meet the ever-changing needs of our clients.
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