An increased demand for insurance solutions has been seen in the Asia-Pacific region (APAC) as its economies open to the rest of the world and businesses look to grow, this was met by insurers focused on retention and targeted growth, according to Aon’s Q2 2023 Global Market Insights report.
The pricing environment was moderate across most lines, with ample capacity and prudent underwriting. Limits were stable, with some exceptions, and insurers increased deductibles to address the impacts of inflation, but coverages remained stable.
Analysts said: “With economies and travel now largely open across the region, businesses continued to expand and in turn sought to enhance and broaden their insurance solutions. Insurers generally responded favourably; enhanced solutions were available, especially for in-appetite, well-performing risks.
“Capacity continued to enter the market through new insurers as well as an expansion of appetite from insurers seeking to diversify. This new capacity was largely focused on longer-tail lines such as Casualty and Professional Indemnity.”
According to the report, capacity was sufficient across most products and risk types and new capacity entered the market in areas targeted for growth.
Professional Indemnity was a notable exception analysts highlighted, where insurers were conservative in their capacity deployment, especially for higher-risk professional activities.
In the second quarter, well-managed risks experienced generally favourable conditions while less-preferred risk types and poor-performing risks experienced a more challenging environment, Aon highlighted.
Despite a few notable exceptions, the quarter saw a moderate pricing environment across most lines. Increased competition led to softer market conditions for Cyber, Directors and Officers and middle market risks, while challenges continued for higher-risk sectors, risks with adverse claims experience, and Natural Catastrophe- exposed Property risk.
Insurers also demonstrated flexibility and a willingness to negotiate, particularly on Auto and Directors and Officers risks, while Cyber, Casualty and Professional Indemnity, as well as non-preferred and loss-active risks experienced a more conservative and rigorous environment, and extensive underwriting information was required. Scrutiny of asset values continued.
Although limits were generally stable, Natural Catastrophe Property and Cyber were notable exceptions, according to the report. On Natural Catastrophe Property aggregates continued to be imposed, and regarding Cyber, insureds looked to re-invest in higher limits.
Because of inflations, insurers increased deductibles to reduce their exposure to attritional claims and to manage their Natural Catastrophe exposure. Coverages remained generally stable and broader terms could be achieved for Cyber, where cyber security maturity was demonstrated.
Insurers carefully monitored their exposure to bushfire liability, worker-to-worker risk and contractual liability in Casualty and coverage terms tightened to address valuation concerns in Property, analysts added.
Ben Rolfe, Head of Commercial Risk Solutions, Australia, said: “As Insurers look to pass on reinsurance retention uplifts, buyers continue to push for new ways to manage this gap between their own retention capability and capacity availability.
“We have seen a strong uptake in the purchase of parametric solutions and other captive enablement structures to bridge this gap allowing for more sustainable long term risk transfer.”
The report also noted that, with the implementation of the Australian treasury- proposed mandatory climate reporting requirements, scheduled to begin on July 1, 2024, the country will stay in step with New Zealand on climate regulation.
This will also help companies and investors maximise economic opportunities in the shift to clean energy and management of climate risk.
