2022 Insurance State of the Market

In its 2022 Insurance State of the Market report, Aon South Africa unpacks key global insurance market trends as well as local trends that are affecting the insurance market in a volatile and unpredictable world.

The myriad direct and indirect impacts related to the unfolding geopolitical events in Eastern Europe have been profound and are expected to continue as rising commodity prices fuel inflationary pressures, decreased demand dampens global trading and global supply chains suffer further disruptions.

Insurers, looking to manage volatility, have already begun modifying coverage terms and conditions – including those related to cyber, terrorism, sanctions and war, pandemics as well as coverage territories. At the same time, business challenges and new risks continue to emerge from climate change and environmental, social and governance (ESG) pressures, talent/skills shortages, struggling economies and socio-political unrest. Large-scale losses due to natural catastrophes loom large and are adversely impacting lives and businesses.

Some of the key market trends covered in Aon’s State of the Insurance Market include:

• Pricing – Rate increases continued in Q1 but have decelerated across large portions of the market, becoming generally modest, with the key exceptions of cyber as well as higher-risk sectors, and risks with adverse claims experience.
• Limits – Limits have stabilised as portfolio mandates have become less prevalent. Adjustments were made in Q1 on a case-by-case basis.
• Retentions – Retentions/deductibles have broadly stabilised, although increases applied in Q1 to trending loss areas and poor performing risks. In addition, minimum deductibles have been applied to designated business sectors. Insureds continue to explore deductible options to help offset premium costs.
• Coverage – Coverages have broadly stabilised, except in targeted areas including Sasria, cyber, terrorism, war and sanctions (particularly those relating to Ukraine, Russia and Belarus).
• Capacity – Capacity has expanded in some areas and stabilised across most lines with the key exceptions of cyber and natural catastrophe-exposed property. Property insurers may write down capacity based on valuation increases.
• Underwriting – Underwriting rigor continues to increase. Insurer appetite broadened in some growth-focused targeted areas, although this remained limited in nature as insurer caution related to bottom lines continues. Quality underwriting information remained a key enabler of superior renewal outcomes.
• Claims – Information requests can be onerous, and timelines can be challenging. Insurers, adjusters and other role players have been placed under a tremendous burden due to the volume of claims arising across multiple lines of coverage.

Challenging and unpredictable market conditions combined with emerging risks previously not considered have refocused buyers on the value, structure and overall cost of their insurance programme.  The makeup of risk transfer is evolving. In most cases, buyers will be faced with decisions around how to manage an ever-expanding and complex risk transfer need. It has never been more important to focus on the Total Cost of Risk (TCOR) rather than risk transfer or premium cost.

Download the Aon South Africa 2022 Insurance State of the Market report Here