Best's Review

AM BEST'S MONTHLY INSURANCE MAGAZINE


ADVERTISEMENT
ADVERTISEMENT

Industry Updates
‘Working Through a Tougher Period’

Aon sees challenges for commercial insurance buyers in Europe.
  • David Pilla
  • July 2019
  • print this page

Europe's commercial insurance market is moving toward greater consistency in price firming following high catastrophe loss levels, which broker Aon plc said will have a strong impact on buyers.

“We are now working through a tougher period where the market is in transition—although it is not yet a hardening market,” Hugo Wegbrans, chief broking officer, Europe, Middle East and Africa, Aon, said in a report. “I'd prefer to call it a firming environment, where rates are increasing for specific lines of business and industries, some of which also feel a contraction in capacity. However, this differs by country and it is important to understand the complete landscape to make the right decisions.”

Buyers need to be proactive around the renewal process and improve the marketability of their risk profile, said Richard Waterer, managing director, EMEA, in Aon's risk consulting practice, in a statement. “Businesses need to focus on developing stronger risk management programs, identifying areas where claims can be managed and reduced and increasing collaboration between the insurance buying function and their broader enterprise risk management team.”

We are now working through a tougher period where the market is in transition— although it is not yet a hardening market. I’d prefer to call it a firming environment, where rates are increasing for specific lines of business and industries, some of which also feel a contraction in capacity.

Hugo Wegbrans
Aon

Capacity constraints, insurer withdrawals and consolidation are creating challenges in certain lines/sectors such as professional indemnity in the technology sector, international construction and commercial crime, said Aon in the report. The report said rates are firming in some lines and remain flat in others.

The report noted “it would be wrong to infer that insurers are simply pushing through significant rate rises across every line and every client in every country.” Aon said the spread of average property/casualty rate changes range from down 5% up 10% depending on sector, geography and client risk profile.

Lines of insurance such as directors and officers “are seeing a general firming of rates—with sectors such as life science or companies with U.S. listings experiencing more focused and consistent rate increases,” the report said.

From a claims perspective, 2017 saw three of the top 10 costliest insured losses ever as hurricanes Harvey, Irma and Maria caused a combined insured loss of about US$90 billion. Insured catastrophe losses from 2018 are an estimated 36% lower than the previous year but continue to be 26% above the 10-year average, the report said.

The year 2018 was still the fourth-most costly year on record for insurers as the combined cost of the California wildfires stood out as one of the biggest industry events with nearly $16 billion in losses, Aon said. “In the last two years, California has faced a total of US$31.2 billion in losses for this peril alone,” the report said. “In total, global natural catastrophe insured losses reached $247 billion for 2017 and 2018.”

In addition to catastrophe losses, the report said “there has been an increase in loss activity across many insurance lines from motor, construction and marine to crime, professional indemnity and directors and officers.”

According to Aon's report, capacity remains broadly available but with some pockets of challenge. “For well-managed risks, capacity is not yet a problem, although pricing may be under focus,” the report said. “However, where there has been a desire for some insurers to grow their market share as quickly as possible, they have now effectively reversed this strategy as the capacity deployed has exposed them to significant shares of large losses.”

The report also said syndication of risk “is back on the agenda” as capacity constrictions, insurer withdrawals and consolidation “are creating challenges in certain lines and sectors, such as professional indemnity in the technology sector, international construction and commercial crime.”

“Countries across Europe are feeling the impact in different ways,” the report said. In Sweden, automotive product recall and professional indemnity for financial institutions “are proving more challenging to place.”

In France, marine could see a shift to hardening, depending on claims activity and insurer expectations, and in Spain, some local insurers have left the motor market leading to rate increases, Aon said. “Lines of business such as D&O are making their impact felt more consistently across the region.”

Aon noted that “should the remediation activity of insurers addressing rate adequacy, risk quality and attachment point not improve combined ratios in the next 12-18 months, then more dramatic action could be on the horizon as insurers choose to exit sectors and/or lines of business.”

–David Pilla


Back to Home


ADVERTISEMENT