Global insurance market. Overview of products and regional trends for 2024
The year 2023 was characterized by geopolitical turbulence, inflationary pressures and events related to global warming. According to analysts, these trends will continue in 2024. Humanitarian issues are at the top of global priorities for society at large, but worrying concerns about the solvency of insurers and banks following the collapse of the financial sector are also worrying many business leaders.
In addition to these fundamental issues, cyber threats and ransomware, the changing job market and technological advances such as artificial intelligence are worrying people from all over the world, including top executives, according to Aon’s Global Insurance Market Dynamics report.
The results of Aon’s Global Risk Management Survey of nearly 3,000 business leaders worldwide revealed that cyber risks, business interruptions, supply chain disruptions, and the inability to attract and retain talent are among the top business concerns.
While each of these risks presents unique challenges, their increasing interconnectedness and severity require further evolution of risk communication approaches that use rapidly evolving data sets and sophisticated modeling to identify a mix of traditional and innovative solutions that holistically correspond to individual acceptable risks.
This report describes some of the important developments in the insurance market and includes special features to help you navigate the complexities and challenges of today’s risk and insurance environment.
The main trends of the insurance market
The challenging macro environment shaped the insurer’s confidence and strategies. Economic resilience, the gradual improvement of global supply chains and a global construction boom have bolstered insurer confidence, while geopolitical instability, persistent social and economic inflation and climate-related challenges have created uncertainty and conservatism.
While the insurance market continued to slow in 2023 as insurers struggled to balance growth and profitability, conditions continued to differ for favorable and distressed risks.
Privileged and effective risk types experienced increased underwriting, increased available reinsurance capacity from new and established insurers and healthy competition, largely driven by insurers returning to profitability, interest in increasing insurer productivity through rates, and confidence that coverage terms were aligned with intent. insurers
Risks exposed to natural disasters and losses, as well as those that do not demonstrate mature risk management practices, have experienced the most significant price increases and reinsurance capacity constraints, largely due to natural disaster-induced volatility, a challenging early 2023 reinsurance market environment, and increased amounts judicial settlement.
For all risk types, the underwriting environment was focused on risk differentiation. Positive results were achieved through early engagement with insurers and robust risk assessment and control methods, improvements implemented and lessons learned from previous catastrophic losses.
Dynamics of the insurance market
Insurance prices
Unfavorable loss trends put upward pressure on auto and casualty insurance prices, while cyber and D&O insurance saw pricing soften as insurers looked to retain and grow their portfolios. Real estate prices remained volatile amid concerns about inflation, high reinsurance costs, climate change and natural disasters.
Insurance capacity
Coverage was adequate for most products and risk types as leading insurers raised prices and other insurers entered growth-targeted markets. Property risks from natural disasters remained limited and expensive, prompting continued use of alternative solutions, including index-based products, self-insurance and captives.
Insurance underwriting
As insurers focused on profitable growth, underwriting rigidity gave way to flexibility. Insurers focused on individual risk profile, control and performance. Quality and risk differentiation remained a top priority. The use of data and analytics to support decision-making continues to gain momentum. Positive results were achieved thanks to interaction with insurers.
Insurance limits
Most of the placements were renewed with the expiration of the insurance limits and sublimits; however, property limits have increased due to economic inflation, which along with social inflation and “nuclear lawsuits” have also affected auto and accident insurance limits. Higher limits were available for cyber risks, directors’ and officers’ liability insurance, etcas clients sought to restore limits that had been reduced in recent years. Detailed descriptions of the property valuation methodology were required.
Trends in insurance products
Car insurance
A convergence of factors has resulted in moderate to challenging market conditions. Insurer payouts continued to rise due to inflation, increased frequency and size of insurance claims, global supply chain disruptions, labor shortages and advanced automotive technology; however, the availability of alternative solutions and a healthy insurer appetite for well-performing risks have moderated the market impact and increased auto insurance prices.
On the other hand, innovative automotive technologies have improved underwriting approaches and the range of insurance products.
Accident and liability insurance
Moderate market conditions, characterized by stable pricing and underwriting, persist across most insurers’ portfolios, despite market participants’ concerns about economic, social inflation and claims growth.
Complex risk types and programs with low deductibles have seen changes characterized by tight underwriting, conservative coverage and significant rate increases in some cases.
Cyber insurance
Despite the increasing complexity and frequency of ransomware incidents and ongoing privacy losses, market conditions continued to soften as growth-oriented insurers expanded their appetites and coverage in the cyber risk insurance market.
Underwriting requirements have eased somewhat as insurers have become more aware of cyber risk and policyholders have implemented stronger security controls.
Concerns about systemic and supply chain risk continue to grow. The focus on privacy controls continues, with a particular focus on biometrics and behavioral tracking, as well as new privacy and consumer protection regulations.
Insurers continued to evaluate the coverage offered for critical infrastructure, systemic or related events and military risks.
D&O Insurance
The easing continued despite a complex backdrop of heightened risks, including geopolitical instability, inflation, financial market fragility, equity market volatility, supply chain challenges, increased litigation funding and a changing regulatory framework.
Potential for new and established insurers continued to increase in the growth-oriented D&O Insurance market with very few new buyers, creating healthy competition and a favorable environment for customers.
Underwriting remained moderate, particularly for registered exposures, cryptocurrencies, pharmaceuticals and oil/coal exposures, although underwriters showed some flexibility in terms of coverage for target exposures.
Alternative structures (such as higher retentions, coinsurance, quota shares and alternative capital solutions such as captives) continued to complement portfolios.
Property insurance
The market divergence between “target” and “non-target” property risks continued. Risks associated with higher hazard types of employment, or which were exposed to natural disasters or were more loss-making, experienced conservative, difficult and volatile market conditions caused by increased reinsurance costs, natural disaster losses, inflation and supply chain problems supplies
Effective and less risky exposures experienced a more favorable environment characterized by increased coverage and healthy competition; however, the focus on profitability continued. Margin clauses or coinsurance penalties were mandated if estimates were deemed inaccurate or understated.
In response to the volatile geopolitical environment, underwriters have further limited or excluded from coverage risks related to strikes and civil strikes, cyber risks, terrorism, war and sanctions, and broader geographic exclusions. | Oleg Parashchak, Forinsurer / Beinsure