A new report from Aon investigates prospects for the EMEA region after a period it described as resilient.
In 2023, the insurance market in the EMEA region demonstrated a capacity to adapt amid a backdrop of economic fluctuations, geopolitical tensions, and environmental challenges, it claimed.
The landscape of the final quarter showcased healthy demand, underwriting adaptability, a breadth of coverage options, and significant capacity for preferred risk categories.
In its report, Aon noted that insurers were keen on achieving their annual performance goals, which translated into a favourable environment for well-positioned risks. In contrast, sectors identified as challenging or not in line with insurers’ growth strategies encountered stricter underwriting scrutiny, elevated pricing, and limited options.
A critical factor in securing favourable renewal terms across all risk categories was the provision of comprehensive underwriting data and the ability to stand out in the risk pool. Aon explained that insurers placed an emphasis on companies’ investments in corporate responsibility initiatives, viewing these efforts as positive influences on underwriting decisions.
The EMEA region experienced pricing dynamics that were anything but uniform across different insurance products and market segments, the broker said. The conversation was dominated by the uncertainty surrounding pricing, with natural catastrophe risks and related exposures continuing to influence pricing significantly. Conversely, risks perceived as less severe were more likely to see price decreases.
Inflation exerted upward pressure on pricing amid a moderately tempered market atmosphere. Property segments exposed to natural catastrophes and sectors deemed challenging, such as life sciences, chemicals, automotive parts, and mining, faced a tougher market environment.
The phenomenon of social inflation also influenced casualty pricing globally, with a pronounced effect on risks associated with the US. The insurance industry, Aon noted, responded with heightened underwriting diligence for US auto exposures, necessitating comprehensive information and imposing coverage limitations.
Meanwhile, the cyber and directors & officers (D&O) insurance markets saw a continuation of their softening trajectories, characterised by premium reductions and broader coverages.
Finally, the auto insurance sector grappled with escalating claims costs, with particular concern over battery fires and elevated replacement costs tied to electric vehicles (EVs).
Pricing trends remained flat on average but showed significant variation by risk type and insurance product. The most marked price increases were observed in segments prone to natural catastrophes and other high-risk categories, while cyber insurance pricing experienced a decrease. Inflation emerged as a central theme in pricing discussions.
Concerning capacity, Aon explained that while the market was generally accommodating, appetite for middle-market and underperforming risks was constrained. Interest in the Middle East grew among international insurers, leading to increased capacity in the region.
Underwriting practices underscored the growing importance of corporate responsibility, maintaining general discipline but showing increased flexibility in cyber and financial lines. Property exposures, especially those concerned with natural catastrophes, faced intensified scrutiny.
Coverage terms, including exclusions for per- and polyfluoroalkyl substances (PFAS) and war, were mostly renewed as per existing agreements. However, specific markets like South Africa witnessed constraints, particularly in property and liability coverages.
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