Geography Trends Q4 North America

United States

Market Dynamics

Q4 Automobile Summary

Overall (Challenging)

Insurers remain cautious with respect to US Auto Liability fleet risks, especially for larger fleets, long-haul and heavier vehicles, and passenger transportation.

Pricing (+1-10%)

Single digit rate increases are common, but increases may be higher or lower depending upon loss experience and insurer relationships.

Capacity (Ample) Capacity is sufficient for most risks; however, insurers may use reinsurance if primary risk transfer limits exceed USD2 million.

Underwriting (Prudent) Insurers are cautious about adding large fleet risks to their portfolios so competition may be more limited, especially for larger fleets or where there is more primary risk transfer. For trucking and passenger transport fleets, evidence of strong fleet safety and use of telematics and related software is more important than ever.

Limits (Flat) Most limits remained the same this quarter except where acquisitions or divestitures impacted the program structure.

Deductibles (Flat) Most deductibles remained the same this quarter except where acquisitions or divestitures warranted a change. Risks with larger auto fleets are becoming more interested in structured risk financing for Auto buffer layers between the primary and umbrella policies.

Coverages (Stable) Coverages generally remained the same, largely driven by the highly regulated nature of U.S. Auto Liability coverage.

A Look Ahead (Moderate) More stability in primary layers is expected, with a reduction in rate increases for most risks except where loss experience has been adverse.

Q4 Cyber Summary

Overall (Challenging)

Increased frequency and severity of ransomware related losses from 2019 through 2021 caused loss ratios to deteriorate for many high premium volume Cyber insurers, leading to challenging market conditions. Biometric data collection regulations, global and domestic privacy regulations, and the FTC’s regulation related to known cyber vulnerabilities are causing cyber insurers to strengthen underwriting and introduce new exclusionary wording.

Pricing (>+30%)

The rate environment hardened throughout 2021 primarily due to ransomware-related losses and concerns regarding systemic, correlated risks, with the largest corrections imposed in H2 2021. Additional pressure continues on excess layers as insurers focus on increased limit factors (ILFs) when offering quotes.

Capacity (Constrained) Insurers continue to tighten their management of global aggregate capacity based on class of business, attachment point, and cybersecurity control posture. A limited number of insurers withdrew from the market due to poor losses. While new capacity is expected to enter the market in 2022, it likely will not represent a net gain to the total available global capacity for Cyber. Aon is working with clients to deploy alternative risk transfer strategies such as captives, fronted arrangements, or larger self-insured portions of a program to assist in obtaining desired limits.

Underwriting (Rigorous) Underwriting rigor related to ransomware controls and privacy regulatory controls has strengthened. If required underwriting information is not adequate, ransomware or regulatory related coverage will not be offered, or will be sub-limited and/or co-insured.

Limits (Decreasing) While most risks renewed at expiring limits levels, a small percentage experienced a reduction in limit either voluntarily (to help manage premium costs) or as required by insurers.

Deductibles (Increasing) Mandatory retention increases are common, the extent of which is based on underwriting information and legacy program structure. Along with retention adjustments, insurers are actively correcting waiting periods for business interruption / systems failure.

Coverages (Restricting) Some insurers are removing non-core Cyber coverages (e.g., Full Media, Cyber Crime) and previously sub-limited coverages. Excess insurers are reviewing sub-limits, regardless of attachment, and many are no longer offering followed/drop-down coverage nor recognizing coverage where there is erosion of the underlying limit for these coverages. Insurers continue to scrutinize coverage related to critical infrastructure, systemic, and correlated events, and impose restrictions on either a generalized or event-specific (e.g. Log4j) basis.

A Look Ahead (Challenging) Continued rate pressure is expected for at least the first half of 2022 and will be based on underwriting information provided, class of business, prior rate adjustments, and legacy program structure. On a risk-by-risk basis, insurers will continue to require retention increases, limit aggregation reductions, and may limit coverage. Insurers will continue to require extensive underwriting data and information.

Q4 Employers Liability/Workers Compensation Summary

Overall (Moderate)

The primary Workers' Compensation market is competitive for most risks, with rates hovering near flat. Insurers are increasingly aggressive in their pursuit of new business.

Pricing (Flat)

Pricing for most risks is near flat; however, without competition, incumbent insurers may propose modest rate increases, except where loss history warrants higher rates.

Capacity (Abundant) The market for large Workers' Compensation programs has expanded. Pandemic conditions (i.e., fewer employees in large office settings) are reducing concentration risk.

Underwriting (Flexible) Insurers are increasingly competitive on pricing, program structures, and collateral. Some multi-year rate guarantees are available.

Limits (Flat) Most clients purchase statutory limits for Workers' Compensation. Employers Liability limits are renewing flat in most cases.

Deductibles (Flat) Expiring deductibles can be achieved in most cases.

Coverages (Stable) US Workers' Compensation coverage is highly regulated and therefore generally consistent from year-to-year. Employers Liability insurers are seldom requiring pandemic or related exclusions.

A Look Ahead (Moderate) Expect continued vigorous competition as Workers' Compensation remains one of the most profitable lines for insurers in the Commercial Risk sector.

Q4 Trade Credit Summary

Overall (Soft)

Insurers continue to increase underwriting headcount and new business budgets. Competition remains strong, and capacity is abundant.

Pricing (Down)

Significant competition and favorable loss ratios continue to drive a competitive pricing environment.

Capacity (Abundant) Insurers continue to increase authority lines for underwriters. In addition, new insurers are expected to enter this space, bringing additional capacity.

Underwriting (Flexible) Underwriting remains prudent even as appetite is expanding and underwriters are demonstrating flexibility.

Limits (Increasing) Limits are increasing in response to inflation and economic reopening.

Deductibles (Decreasing) Deductible decreases are available in light of favorable loss ratios (below historic lows), and COVID-related losses not materializing as expected.

Coverages (Broadening) Insurers continue to broaden coverage terms in an effort to compete for business.

A Look Ahead (Soft) An environment of increasing capacity and decreasing rates is expected to continue. Insurers are expected to expand their appetite for higher risk credits and geographies to recalibrate loss ratios. Noncancelable limit offerings will likely continue to see the greatest level of investment by insurers.

Q4 Casualty/Liability Summary

Overall (Moderate)

Primary General Liability and Umbrella / Excess Liability conditions are moderating for most risks.

Pricing (+1-10%)

A significant pricing deceleration has occurred and single digit rate increases are now common, with the exception of risks in certain industries, or with adverse loss experience or challenging exposures, such as fire potential. For well-performing risks, and where capacity is abundant, some rate reductions have been experienced.

Capacity (Ample) While capacity remains less than in 2019, there is generally healthy competition for Excess Liability placements and some insurers are again increasing their lines. New capacity insurers are deploying capital cautiously.

Underwriting (Rigorous) Underwriters are asking more questions than ever before, particularly with regard to certain chemical compounds (e.g., PFAS) and fire exposures. Excess terms are more actuarially driven, particularly in lower layers and for risks with large US auto fleets.

Limits (Flat) While most limits remained the same, as exposures continue to grow, some increases have been achieved following the reductions of 2020.

Deductibles (Flat) Most retentions / attachment points remained the same this quarter.

Coverages (Stable) Most coverage needs can be addressed in the marketplace. There is uneven application of pandemic / communicable disease exclusions, and some insurers are differentiating their offerings through coverage grants. PFAS and Cyber exclusions remain common.

A Look Ahead (Moderate) Risk differentiation will continue to be important. Starting the renewal process early to help gather responses to additional questions from underwriters is a good investment of resources. Conditions overall are expected to continue to moderate with smaller rate increases or possibly decreases, especially for risks with sizable exposure increases.

Q4 Directors and Officers Summary

Overall (Moderate)

The portfolio remediation of recent years has abated. Capacity from new market entrants, as well as from existing insurers, is making an impact, albeit typically in mid/high-excess attachments.

Pricing (+1-10%)

In many respects, balance has returned to the D&O marketplace. Favorable risks generally have sufficient capacity and many are renewing with only single-digit increases.

Capacity (Ample) Expiring capacity and program structure can be achieved in most cases.

Underwriting (Rigorous) The underwriting environment remains challenging, particularly related to ESG, as well as excessive fees (on Fiduciary placements), and return-to-office / vaccine mandates (on Employment Practices Liability placements).

Limits (Flat) Expiring limits can be achieved in most cases.

Deductibles (Flat) Deductibles are generally stable, except for risks with poor loss experience, or for SPACs / de-SPACs.

Coverages (Stable) Expiring coverage terms can be achieved in most cases.

A Look Ahead (Moderate) The D&O market is expected to be more balanced - with a broader distribution of pricing outcomes. This will usher in opportunities to be more proactive, strategic and measured with the renewal process, including selectively marketing placements to drive pricing competition.

Q4 Property Summary

Overall (Moderate)

Global losses for 2021 spiked considerably in Q4 and 2021 ended with the second highest global insured losses in over a decade. The rate environment moderated slightly from Q3 to Q4, with profitable, limited catastrophe-exposed risks experiencing flat to modest single digit rate increases. Risks with adverse loss histories or in challenging occupancy classes are experiencing slightly higher increases. New capacity has been developing to drive competition on shared and layered programs while single carrier capacity remains somewhat constrained.

Pricing (+1-10%)

Following a peak of >30% average rate increase which occurred in Q3, 2020, this quarter marks the fifth consecutive quarter of deceleration. Rate increases on renewal continue but are now averaging in the low single digits after seventeen quarters of a positive rate environment. Challenging occupancy classes that experienced difficult conditions early in the hard market cycle are generally moderating but are slightly above the Q3 average.

Capacity (Ample) Capacity remains ample for attractive, loss free risks. London and Bermuda insurers are providing valuable capacity to help fill gaps.

Underwriting (Prudent) Underwriters remain cautious around two particular areas - Contingent Time Element (CTE) coverages and property valuation. Given continued supply chain constraints and significant inflation, underwriters may propose reductions in CTE limits and as well as coinsurance provisions or margin clauses where reported replacement cost values are in question.

Limits (Flat) Limits have remained largely flat with any increases mostly in the single digit range.

Deductibles (Flat) Deductibles remain relatively flat. The percentage of insureds opting to take a higher retention has decreased notably since 2020.

Coverages (Stable) Underwriters are inquisitive about indirect time element exposures, as well as how replacement cost values are being calculated. Despite the increase in queries, very few coverage restrictions have been imposed in these areas. Property valuation was a main topic at January 1, 2022 treaty renewals. Underwriter guidelines may evolve over the next two quarters with a push for coverage restrictions in this area.

A Look Ahead (Moderate) Modest, single-digit rate increases are expected in Q1, 2022. The impact from January 1 and April 1 property catastrophe reinsurance treaties will be monitored for potential downstream impacts to insureds.

EMEA and the UK: Regional Market Dynamics

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