Analysts at global professional services firm Aon have noted continued upward pricing pressures through the first quarter of 2023, including ongoing inflation and rising loss costs, as well as surging reinsurance pricing and a contraction of reinsurance capacity.
At the same time, however, a strengthening of insurer profitability and pressure to achieve growth targets served to dampen increases and drive targeted decreases over the quarter, Aon added.
Notable exceptions included natural catastrophe exposed property business, analysts reported, as well as higher-risk sectors, US-exposed risks, and risks with adverse claims experience, which experienced increases that were in some cases significant.
And despite continued pricing pressures, capacity remained sufficient across most products and risk types and increased in some parts of the market.
Again, notable exceptions – driven largely by reinsurance treaties – included property, especially for risks with heavy natural catastrophe exposure, and risks with high hazard exposures.
In terms of underwriting, Aon reports that insurers generally remained focused on profitable growth and retention of well-performing risks through Q1 and continued to expand their appetite in targeted areas.
But the impacts of global inflation, combined with other factors, continued to drive up loss costs, and scrutiny of asset values and methodologies continued.
Limits were also pressured upward as inflation continued to increase exposures, as well as verdicts/settlements, and supply chain challenges impacted business Interruption modelling, while changes to reinsurance treaties prompted some limit and sub-limit reductions.
Further notable trends from Q1 included mandatory increases in deductibles for property placements and nat cat exposed risks despite deductibles generally remaining quite stable.
Increases were also required for some challenging risk types, poor performing risks, and risks deemed to have insufficient controls.
And finally, Aon reports that property terms and conditions in particular faced ongoing pressure following the 1/1 renewals, especially where a clear valuation methodology was not evidenced.
New nat cat restrictions were also imposed for certain events, while insurers remained focused on limiting their cyber exposure and exclusion related to the events in Eastern Europe remained in place.
