across most lines and classes globally, as COVID-19 impacts, including the economic downturn, have resulted in heightened underwriting scrutiny and risk aversion from insurers.
Aon’s report finds that while capital and capacity are impacting market conditions, a confluence of macro factors and events are the key market drivers, namely increased frequency of natural catastrophes, social inflation and 0% interest / lower investment yields. Upward pricing momentum is expected to continue through 2021, though the approximately US$20 billion of capital that entered the market globally between March and December 2020 may temper rate movements.
Cynthia Beveridge, President, Aon Broking, Commercial Risk Solutions, Aon, said: “There is general optimism that the rollout of the COVID-19 vaccine will have a positive economic impact. Along with the introduction of additional capacity into the market, this may result in an easing in the second half of 2021 of some of the challenges experienced in the risk and insurance environment during 2020. That said, risk complexity will continue to be impacted by supply chain vulnerability, a virtual workforce, ongoing economic uncertainty, social inflation and weather volatility. We expect heightened underwriter scrutiny on supply chain transparency and resilience, COVID-19 and communicable disease safety measures and cyber threat resilience. Pricing and coverage terms will continue to address these concerns.”
Hugo Wegbrans, Global Chief Broking Officer, Commercial Risk Solutions, Aon, added: “When renewing cover, we are advising our clients to explore alternatives such as captives and alternative program structures; describe the differentiators that make them a ‘better’ risk; start renewal planning early because of the busy market and the time needed to evaluate additional underwriting information; and set realistic expectations, including with internal stakeholders.”
Neil Harrison, Global Chief Claims Officer, Commercial Risk Solutions, Aon, said: The impact of claims related to COVID-19 for clients and insurers has not yet been fully seen. The fluid situation with regards to business interruption, driven by regulatory activity, litigation and the macro-economic environment will continue to bring complexities to the fore through 2021. COVID-19 has also resulted in claims activity in 20 other lines of coverage, with numbers and costs likely to increase. Consideration of insurer claims performance and understanding of the obligations of all parties in a claim situation are key issues for our clients.”
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