Europe's commercial insurance buyers are facing higher prices and less cover in some lines of business, global insurance broker Aon PLC has warned.
In a new report, "Navigating a Changing Insurance Market," the broker said insurers were reassessing their business models in light of "unprecedented" loss levels — including the 2017 and 2018 natural catastrophes and a spate of man-made claims — as well as changing buyer demands and risk exposures, reinsurance pressures and higher costs of doing business.
Aon said insurers are examining rates, terms and conditions; the capacity they are willing to deploy; expectations of customers' risk management standards; the triggers for insurance payouts — known as attachment points — and the risks they are prepared to continue insuring.
As a result, the broker said, customers seeking insurance in "distressed sectors," such as property cover for the waste-to-energy and food markets, may struggle to get the desired level of cover at what they see as an acceptable price, and may have to pay more or retain more risk.
However, Aon added that the market could not yet be described as hard across all lines; rather, it is entering a "transitionary phase" better described as a "firming environment," as insurers try to improve pricing and underwriting performance. Effects on buyers, Aon noted, would vary by country and line of insurance business.
The broker said average property and casualty rate changes across countries and lines of business in Europe range from reductions of 5% to increases of 10% depending on industry, location and client risk profile. Aon said: "It would be wrong to infer that insurers are simply pushing through significant rate rises across every line and every client in every country."
The heatmap included in Aon's report shows that potentially troublesome areas for buyers include directors' and officers' liability in the U.K. and the Netherlands; motor fleet in the Netherlands, France and Spain; professional indemnity in the U.K., Netherlands and Portugal; and property and business interruption in Germany, the Netherlands and Italy. These are areas where prices are going up by more than 10%; where there is a potential for contracting capacity; and where there is an increased likelihood of underwriting referrals and a detailed review by insurers of cover, limits and deductibles, according to Aon.
Aon's description of Europe's commercial insurance market echoes comments from insurers and managing general agents about the U.K. commercial insurance market made at the British Insurance Brokers' Association annual conference in May.
Bob Thaker, CEO of specialist insurer Hiscox Ltd.'s U.K. operation, said in an interview at the conference: "From what I'm seeing, in certain segments in the commercial segment rates are hardening — understandably so."
Allianz Group's U.K. CEO, Jon Dye, said U.K. commercial rates were hardening because of "substantial claims inflation." He added: "The cost of repairing things is going up and that is putting some pressure through the market."
Dye also said the division was seeing claims in its commercial division that it would normally associate with a recession: "It is undoubtedly true that we see an increase in the number of fires. Some of that is to do with arson, and I think it is a consequence of the economic pressure the country is under."