Resilience strategies ‘fundamental’ for industry, Aon says
Aon’s fourth-quarter Global Insurance Market Insights report highlights resilience as a definitive theme for the industry amid economic, political and natural disaster risks.
It says insurers introduced protective measures last year, such as adjusting underwriting and refocusing appetites, to help combat inflationary pressures.
This trend “played out decidedly” in quarter four, with a “healthy appetite” among insurers and availability of coverage options producing solid performances.
However, the report says increased underwriting scrutiny in areas not targeted for insurer growth has left policyholders in such sectors with higher prices and fewer options.
Aon also warns that a single major catastrophe could bring a return to “very hard market conditions”.
“Most of the increased capital in the market is due to favourable results as opposed to an influx of new capital. This indicates that there is some fragility to this market moderation.”
The global broker has flagged challenging conditions for Australia, with last year bringing moderate increases in pricing due to worsening loss tails.
“Underinsurance remained a top priority due to persistent inflation, slow supply chain recovery and rising labour costs,” Aon Head of Placement, Property and Casualty in Australia Tracy Riddell said. “Clients are encouraged to stay diligent around property and business interruption values.”
Asia-Pacific insurers had “mixed success” passing on costs and higher retentions required by reinsurers for the year. But Aon says a more orderly reinsurance cycle this year will allow for greater insurer flexibility.
It says continued core inflation, developing cyber threats, increased demand for parametric cover and evolving economic, geopolitical and humanitarian events are concerns for insurers this year.
Aon Commercial Risk CEO Joe Peiser expects resilience to continue informing insurer behaviour this year after it helped “weather the challenges of 2023”.
“In 2024, it will become a fundamental enabler of business strategies,” he said. “Investing in resilience – including robust risk strategies – has never been more important.”
See the full report here.