Trade credit joins cyber on Q2 ‘challenged’ markets list; D&O eases: Aon

Conditions and pricing tightened in trade credit insurance to push the segment onto  Aon’s list of challenged UK markets alongside cyber while D&O coverage eased into softening,  Aon said in its quarterly study of UK insurance lines.

Cyber remains the sticky point with challenging conditions across five of six metrics, as had been the case in Q1. Pricing is said to be up in excess of 30%, capacity is “constrained,” and underwriting “rigorous.”

“Geopolitical events in Eastern Europe created additional uncertainty and new complexity in an already challenged market, leading to continued rate increases,” authors wrote. Limit deployment strategies continue to constrain capacity.

But the outlook has softened lightly from what Aon foresaw in its Q1 reading. While the “challenging market environment is expected to continue,” Aon authors now hold out hope of “perhaps a slight improvement” in H2 2022 as to-date adjustments to pricing, limits, deductibles and coverages gain traction.

Property is said to have eased to “moderate” conditions overall in Q2, but the segment is still seeing single digit price gains and “rigorous” underwriting. Deductions re said to be rising in Q2.

“Driven by previous underwriting adjustments, improved insurer results and a focus on growth, the market continued to stabilize in Q2,” authors wrote. Challenges remain for specific industries and loss-impacted accounts where insurers get disciplined. Stronger competition slowed price gains for more desirable accounts.

Property insurance conditions could stabilize further in Q3 on rising capacity, authors suggested. Growth plans of incumbent insurers and new capital entering the market could help offset the upward pricing pressure from inflation, they claimed.

Trade credit insurance underwent a major swing in conditions during the course of Q2. Overall conditions are called “challenging” amid price gains of 11 to 30% versus “moderate” conditions and price softening reported as recently as Q1. Underwriting has gone from “flexible” to “prudent” and limits which had increased in Q1 are flat in Q2. Increased demand for cover in Q3 could further those trends analysts wrote.

Directors and Officers (D&O) is loosening. Four of six metrics tipped from moderate to easing conditions versus Q1 readings. Pricing is now said to be down, capacity “abundant,” underwriting “flexible” and coverages “broader” in changes from the Q1 read.

Find the full report here.

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