The global insurance market in the second quarter of 2024 continued its growth trajectory, underpinned by strong profitability reported by many insurers in 2023 and improvements in the reinsurance sector.
According to the latest report from Aon, the market remained focused on disciplined underwriting and pricing strategies aimed at long-term profitability and programme stability. Insurer growth ambitions contributed to a competitive and well-capitalised environment, with ongoing price moderation, flexible underwriting, and the availability of various coverage options, particularly for preferred risk categories.
During Q2, competition driven by insurer growth ambitions created favourable conditions in the Property market for many risks. The US market, in particular, saw its most favourable conditions in nearly seven years, with pricing outcomes for desirable risks ranging from single-digit increases to low double-digit decreases.
However, market conditions were more challenging in regions such as the Nordics, Brazil, and Mexico, as well as in certain high-risk sectors, where placement outcomes were less favourable.
Aon noted that US casualty exposures, both domestic and international, faced increased scrutiny due to concerns over reserve deterioration from previous years and ongoing issues related to nuclear verdicts and adverse litigation trends.
Risks with US exposure, particularly in heavy industries, experienced rate increases, more restrictive terms and conditions, and higher Umbrella attachment points. In contrast, well-performing risks and those without US exposure generally benefitted from healthy competition as insurers sought growth opportunities.
“A capacity-rich market focused on sustainable growth and program stability is good for our clients, many of whom are taking advantage of the current market conditions by restoring coverages and limits,” Aon commercial risk CEO Joe Peiser (pictured above) said.
The D&O and cyber insurance markets continued to be characterised by healthy competition and abundant capacity. However, some D&O insurers, particularly those focused on programme stability, were less inclined to reduce prices, especially in higher excess layers.
Despite a rise in claims, the Cyber insurance market remained buyer-friendly, with continued cost savings available, particularly in high excess layers. Aon observed growing interest in cyber insurance beyond the US and Europe, reflecting increasing awareness of cyber incidents and expanding capacity.
Reinsurance renewals in 2024 have seen steady improvement, as highlighted in Aon’s latest Reinsurance Market Dynamics report. Increased capacity and a heightened appetite from reinsurers led to rate reductions for Property catastrophe risks and improvements in terms and coverage at mid-year.
Reinsurance capital reached a new record of $695 billion at the end of Q1 2024, driven by retained earnings, recovering asset values, and new inflows into the catastrophe bond market, with Insurance-Linked Securities (ILS) capital reaching an all-time high of $110 billion in Q2.
Despite the overall robust capitalisation of the insurance and reinsurance markets, Aon pointed to ongoing challenges, particularly related to natural catastrophe losses and Casualty reserve development. The record 37 natural catastrophe events in 2023, each exceeding $1 billion in insured losses, underscored the volatility in this sector.
Additionally, adverse reserve development and social inflation contribute to an uncertain outlook for Casualty. Aon is closely monitoring forecasts for the 2024 Atlantic hurricane season, which is expected to be active, and any significant shocks from natural catastrophes or Casualty loss trends could materially affect future market dynamics.
The current market, rich in capacity and focused on sustainable growth and programme stability, is presenting opportunities for clients to restore coverages and limits that had been reduced in previous renewals.
Aon highlighted that the increasing availability of sophisticated analytics is boosting client confidence in implementing the right mix of traditional and alternative risk solutions and optimal coverage structures, aligning with their evolving risk strategies.
In the UK and broader EMEA regions, the Casualty market saw healthy competition as insurers targeted growth across domestic and multinational risks, excluding those with US exposures. However, the US litigation environment had a significant impact on placements with substantial US exposure, leading to tighter terms, conditions, and capacity restrictions.
Since the first anniversary of Lloyd’s Cyber War exclusion, Aon observed that some domestic insurers have implemented similar wording. Cyber insurance capacity continued to grow, especially in Excess layers where price reductions were achievable, and more flexible underwriting allowed for tailored coverage to meet unique client needs. Ransomware remained the primary driver of claims activity.
The D&O market in the UK and EMEA remained favourable for buyers, with some insureds exploring expanded coverages and higher limits, particularly in ancillary lines such as crime, employment practices, and cyber. For companies with stable risk profiles, long-term agreements were available.
The property market in Europe experienced improvements as insurers pursued growth strategies. New capacity entered specific European territories, although the Nordic region faced capacity restrictions due to large claims.
The automobile market saw rate increases driven by rising claims costs, particularly from higher repair costs and a slight increase in claims frequency linked to natural catastrophe events.
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