Canadian insurance market remains challenging, according to Aon's Quarterly Global Market Insights Report
TORONTO, Feb. 9, 2022 /CNW/ -- Aon plc (NYSE: AON), a leading global professional services firm, has released its quarterly Global Market Insights Report, which provides data-driven insights and analytics on risk and insurance market trends around the world to enable better decision making.
Aon's report for the fourth quarter of 2021 emphasizes how new forms of volatility are impacting insurance market trends and the risk agenda for organizations, driving the growing need to innovate and develop solutions to assess, quantify and treat emerging risks profiles. Fourth-quarter 2021 highlights for Canada include:
- Casualty/Liability: The primary market is stable as insurers focus on profitable growth. Well-performing, non-U.S. exposed risks are experiencing single-digit rate increases. The excess market is challenged in high exposed classes, impacting renewals and new capacity requirements. While U.S. litigation trends and rising loss costs play an important role in pricing, facultative reinsurance rates, capacity and conditions are also important factors.
- Cyber: Market conditions remain challenging. Controls and loss experience are the primary drivers of pricing and terms. A lack of proper actuarial modelling from the outset of the cyber marketplace has led to historic under-pricing; as more claims are paid by insurers, better claims data is developed, which is leading to more accurate models reflecting higher pricing.
- Property: Signs of stabilization are emerging. Some rate pressure and capacity issues continue, however, particularly for complex and/or natural catastrophe-exposed risks. Well-performing risks are experiencing modest rate increases.
- Directors and Officers: Profitability issues, combined with ongoing concerns related to the impacts of COVID-19 on some sectors, continue to create a challenging market environment. There is a heightened focus on the ability of companies to deliver on their Environmental, Social and Governance (ESG) commitments. Canadian market trends are lagging behind the U.S. trends, with 2022 expected to be the third year of rate increases in Canada.
"The Canadian insurance market will continue to climb out of the hard market in 2022," said Russell Quilley, chief broking officer for Canada at Aon. "With many of the insurance carriers looking to grow in 2022, this additional pressure will translate to more favourable terms for clients."
Global highlights include:
- While uncertainty from the COVID-19 pandemic was a key driver of price increases, conservative underwriting and capacity constraints, it has largely subsided, and volatility has stabilized - with the most notable exception being cyber products. The recovery in certain economies, industries and organizations continues. For example, among C-suite leaders and senior executives across several industries surveyed in September 2021, nearly 90 percent in North America and Europe expected business conditions to be stronger in a year.
- The cyber landscape is becoming increasingly complex and volatile, with frequency and severity of loss events continuing to challenge clients and insurers. Market conditions remain difficult, with rigorous underwriting along with significant rate and deductible increases. In Aon's 2021 Global Risk Management Survey, cyber risk topped the list as the number one current and predicted future risk globally and was in the top 10 list of risks across surveyed regions, industries and respondent types.
- Insurer profitability, strained by loss frequency and severity as well as a prolonged low interest rate environment, is strengthening in some key market segments, leading to changes in risk appetite and deductibles and a shift in focus from portfolio remediation toward profitable growth.
- There is a growing trend among insurers to reduce maximum limits, leading to more layers or coinsurance per placement. The sub-limits for high-hazard risks are under pressure. Deductibles have stabilized as mandates have been applied, although further adjustments are expected in certain pockets where underwriting performance remains strained.
- New capacity has entered the market and is being deployed strategically, with a focus on minimizing volatility.
- Following the exclusionary language modifications that were imposed on recent renewals, coverage has now stabilized across most lines. Climate change and sustainability are also areas to watch in terms of coverage.
- Environmental, Social and Governance (ESG) risks continue to increase in importance for insurers as well as in their evaluation of clients and business partners. Though considered an underrated risk in Aon's Global Risk Management Survey, ESG is predicted to enter the top 15 risks globally in the next three years.
The report shows the interconnectivity of emerging and established risks, and how businesses are navigating new forms of volatility amid heightened uncertainty. Aon's Global Market Insights includes analysis of market dynamics across products and geographies as well as actionable insight on how organizations can use the information to inform better decisions.
To access Aon's fourth-quarter 2021 Global Market Insights, please click here.
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