Notable market updates in EMEA

Aon plc (NYSE:AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, today released its Quarter 1 Global Market Insights with notable market updates for the Europe, the Middle East and Africa (EMEA) region.

Findings of the report indicate that the market remains challenging; however, there are early signs that the pricing trajectory may be moderating as:

• Insurer growth goals have taken the place of a prolonged period of portfolio remediation
• COVID-19 losses have not materialised as expected
• New capacity continues to flow into the insurance market

As economies rebound in 2021 with the rollout of COVID-19 vaccines, traditional risk and exposure variables are likely to normalise while key longer-term issues gain relevance in insurer appetite and rating models that include:

• Environmental, social and governance issues (e.g., inclusion & diversity, climate change).
• Supply chain resilience and the increased focus on local sourcing of strategically important manufacturing and goods.
• The increase in frequency and severity of weather-related events.
• Special purpose acquisition companies.

EMEA

Like the rest of the world, EMEA faces ongoing economic uncertainty related to the global pandemic. Many businesses continue to rely on government support to survive, and governments are investing unprecedented amounts of resources into the system.

Continued spikes in infection rates, recurring tightening of restrictions and the expected rise in unemployment have all impacted the outlook for growth and reduced the chances of a rapid recovery from the worst recession in 300 years. It is now projected that the economy will return to its pre-pandemic peak in late 2022.

In the meantime, there is widespread anticipation of the COVID-19 vaccine rollout and various deals being struck across the region with vaccine suppliers.

Insurance market & key risks

• Pricing is tempering slightly:Insurance market pricing continues to be significantly up; however, insurer focus is beginning to shift from remediation to profitable growth. As a result, there has been some moderation of the difficult conditions seen in 2020.
• Some pockets remain particularly challenging: Directors & officers, cyber, natural catastrophe property and contingent business interruption coverages, as well as construction, energy, food and waste risks remain particularly challenging.
• New pricing mechanisms are becoming more prevalent: There is a slow but steady migration toward alternative pricing models such as pay-as-you-drive, pay-how-you drive, price-per-minute (or kilometre), etc.
• Appetite is focusing: Underwriters are becoming less flexible on accommodating business outside their core appetite.
• Risk management / control is at the forefront:Insurers are increasingly imposing risk management or control measures as a prerequisite for offering favourable insurance terms.
• Regulators have driven industry changes: Activities of regulators and ongoing court cases have brought many issues to the forefront, creating both short- and long-term impacts.

Claims environment

• Insurer performance is solid despite a challenging environment:The claims environment is difficult, in part due to ongoing logistical challenges related to court systems. Social inflation and similar issues are driving cost in third party claims and assessment of business interruption is a specific issue in the first party arena. Despite these complexities, overall claims performance across the industry for most lines of business remains solid, with valid claims being managed appropriately, albeit seemingly more slowly.
• Centralised authority continues to be a trend:Decision-making authority is transitioning away from local branches to central teams, making local relationships less impactful while heightening the impact of executive relationships and claims advocacy.
• Insurer cost containment measures may be detrimental:To manage costs, some insurers appear to be sacrificing quality in adjuster nominations and in other areas of expertise.

In light of these developments, Aon offers five insurance tips for clients to consider:

1. Provide robust information: Tell your story to underwriters with as much detail as possible. Differentiate your risk and share what you are doing to manage and mitigate the risk.
2. Start early:With a notable increase in information requirements and referral underwriting, the process is taking longer. Therefore, it is crucial to allow sufficient time to react to unfavourable insurer proposals.
3. Explore options: Establish priorities and consider trade-offs such as alternative program structures, capital solutions and rating mechanisms.
4. Review policy wording:Consider how your risk appetite and profile has evolved and work with Aon to ensure your coverage terms adapt to these changes.
5. Be proactive about claims:Leverage Aon’s insurer claims performance insights such as your claims dashboard to inform your market selection. This is where having an expert broker by your side proves to be invaluable in engaging specialised claims advocacy.

To read Aon Quarter 1 Global Market Insights report, please follow the link: https://insights.aon.com/global-market-insights-q1-2021

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About Aon

Aon plc(NYSE: AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

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