UK commercial insurance market enters more disciplined phase

The commercial European insurance market is at the cusp of a more consistent shift towards firming market conditions that will have a strong impact on buyers, a new report by Aon has claimed.

The report, Navigating a Changing Insurance Market, released today (June 4) by Aon, has found that this shift is being driven by insurers’ responses to high-levels of manmade and catastrophe losses, increased operational costs and evolving buyer demands and risk exposures.

In 2017 and 2018 alone, global natural catastrophe losses reached record levels of $247 billion. This unprecedented rise in catastrophe claims has been coupled with increased uncertainty surrounding future losses, as buyers place greater importance on evolving exposures such as reputational risk, intellectual property, cyber and non-damage business interruption, where there is limited historical data and fewer mature risk models.

For commercial insurance buyers, in certain areas of the market, this shift in market conditions is likely to mean increases in rates, capacity constraints, tightening terms and conditions and a more critical attitude from insurers towards risk selection and risk management practices.

The extent to which buyers are experiencing these effects varies from country to country across Europe and by line of insurance. The report has found that there are more challenges where buyers are not providing enough underwriting information or allowing sufficient time for their renewal process.

Conversely, if a business has a good loss record, supporting data, proactive risk management programmes and a thought-through strategy, there are still deals to be done in the market. In the UK, the commercial insurance market is entering a more disciplined phase, and the report finds that buyers will need to focus on providing sufficient risk information and allowing enough time for the renewals process.

Directors & officers, marine cargo, and professional liability are the business lines most impacted by the changing market, while food and waste are challenging sectors for property and business interruption, with a focus on risk management quality.

The 2017 Grenfell Tower fire has triggered challenges for professional liability, leading to rate rises in design, construction and other similar professions.

Aon’s Hugo Wegbrans, chief broking officer EMEA, said: “Commercial insurance market conditions have been very favourable for buyers in the past decade, underpinned by a prolonged soft market period.

“This, along with continuing loss activity, has led to a consistent change in insurers’ attitudes with a renewed focus on profitability. How we respond to the changing market as an industry is critical.

“The market is firming, and buyers need to rethink their approach, ensuring there is an increased exchange of information between parties throughout the year to avoid surprises at the time of renewal.”