Q4 2023: Global Insurance Market Overview | Aon (2024)

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February 8, 2024 12 mins

Q4 2023: Global Insurance Market Overview

An increasingly interconnected and complex risk landscape continues to shape risk strategies and market responses.

Key Takeaways
  1. Pricing was moderate but remained pressured by economic and social inflation. Natural Catastrophe-exposed Property risks and Liability risks with significant U.S. exposures experienced ongoing challenges.
  2. Insurers continued to focus their appetite and capacity deployment, creating healthy competition and options for preferred risk types. Alternative risk transfer solutions gained momentum across both preferred and non-preferred risk types.
  3. While the underwriting environment remained disciplined as respects valuations, risk quantification, and matters related to corporate responsibility, it was characterized by greater flexibility as insurers’ year-end growth targets approached.

2023 can be best summarized with a single word: resilience.

Resilience amidst economic volatility fueled by spikes in interest rates and inflation. Resilience despitegeopolitical instability, social unrest, and humanitarian crises spanning multiple continents. Resilience in theface of devastating natural disasters and mounting climate concerns. While every community, business, and economyhas forged their own unique journey, resilience has been a common denominator.

Resilience shaped the risk and insurance community in 2023 as well. Economic inflation, a slow supply chain recovery,rising labor costs and persistent natural disaster activity pressured property loss costs and extended recoveryperiods. Social inflation, “nuclear verdicts”, and litigation funding drove up liability losses – especially relatedto U.S. exposures. New automotive technologies and distracted driving continued to alter the auto risk landscape.The regulatory environment became more complex and focused on addressing matters related to insurer solvency, cyberincident disclosures, and the use of generative Artificial Intelligence, amongst many other issues.

Over the course of the year, insurers responded to these and other dynamics of the risk and insurance environment byimplementing their own resiliency measures, some of which impacted insurance market conditions. They undertookvarious measures, including refocusing their appetite, adjusting their underwriting policies, shifting their pricingmodels, streamlining their organizations, and aligning with business partners who share their values.

These market dynamics played out decidedly in the final quarter of 2023. We saw healthy appetite, underwritingflexibility, the availability of coverage options, and abundant capacity forwell-performing, preferred risk types, as insurers sought to meet year-end performance targets. By contrast,challenging risk types and areas not targeted for insurer growth faced greater underwriting scrutiny, higher pricingand had fewer options. Across all risks, robust underwriting information and risk differentiation were key driversof superior renewal outcomes, and evidence of investment in corporate responsibility initiatives continued topositively impact underwriting decisions.

Looking ahead, we expect many of the economic, geopolitical, and humanitarian events that shaped 2023 to continue toevolve in 2024, and new trends to emerge, creating challenges as well as opportunities. In this edition of Aon’sGlobal Insurance Market Insights report, we highlight five trends to watch in the short to medium term, including:

1. Cyber attackers will continue to exploit vulnerabilities and adapt their methods to sidestepcontrols, gain unauthorized access to systems, and exfiltrate information from corporate infrastructures. Inaddition, insider risk stemming from IT layoffs, companies’ use of AI and other emerging technologies, and anincrease in class action and other civil and criminal lawsuits related to data protection and privacy will likelypose new challenges.

2. Core inflation will remain subject to volatility stemming from geopolitical instability andchanges in economic policy. At the same time, the scourge of social inflation will likely continue unabated creatingmore volatility for corporations and an invisible tax on consumers.

3. Demand for parametric covers will continue to increase as organizations seek 1) quick liquidityafter a disruptive event, 2) to address gaps in traditional insurance cover and 3) to cover non-traditional risks(non-damage business interruption, contingent exposures, and many more).

4. The worker-driven market will continue as unemployment rates remain at record lows, promptingemployers to adapt their growth agendas to recognize the need for competitive benefits and accommodating workenvironments. Worker upskilling and reskilling will be prioritized in workforce planning strategies.

5. The energy transition will require significant investment in infrastructure, new technologies andprocess enhancements as demand for cleaner energy sources increases. Government policy – including subsidies and taxadvantages – will serve as a key enabler of investments. Supply chains will be vulnerable to increased reliance oncertain raw materials, new technologies and manufactured goods. Higher interest rates and inflation will createchallenges to raise and deploy capital for investment in new assets.

Learn more about these complex, interconnected trends and their potential impacts on the risk and insuranceenvironment in the 2024 Trends to Watch section of this report.

Q4 2023: Global Insurance Market Overview | Aon (2)

Resilience has helped organizations weather the challenges of 2023. In 2024, it will become a fundamental enabler of business strategies. Investing in resilience – including robust risk strategies – has never been more important.

Q4 2023: Global Insurance Market Overview | Aon (3)

Joe Peiser

Chief Executive Officer, Commercial Risk

Insurance Market Overview

Expand the options below to read a summary of how the insurance market trended in Q4 2023 across pricing, capacity, underwriting, limits, deductibles and coverages.

Q4 2023: Global Insurance Market Overview | Aon (4)
  • Pricing

    Pricing was pressured by inflation but remained moderate. Challenged risk profiles and risks with adverse loss experience such as Natural Catastrophe-exposed Property risks and Liability risks with significant U.S exposures experienced more significant price increases.

  • Capacity

    As established insurers expanded their appetite and new insurers entered markets targeted for growth, well-performing risks experienced healthy competition and abundant capacity. Some risks with challenging profiles or adverse loss experience saw capacity limitations and many sought alternative risk transfer solutions.

  • Underwriting

    While underwriting remained disciplined as respects valuations, risk quantification, and matters related to corporate responsibility, insurers’ year-end growth targets led to more flexibility and client options, particularly for preferred risk types. Robust underwriting information and risk differentiation supported superior renewal outcomes.

  • Limits

    Expiring limits were available across most placements. Some insureds sought to reinvest their premium savings in increased limits. Increased limits were often available for well-performing risks and for products experiencing strong insurer appetite for growth (e.g., Cyber and Directors & Officers).

  • Deductibles

    Expiring deductibles were achieved across most placements. Some insureds sought to reinvest their premium savings in deductible decreases. Such decreases were often available for well performing risks and for products experiencing strong insurer appetite for growth (e.g., Cyber and Directors & Officers).

  • Coverages

    Insurers continued to leverage coverage terms as a differentiator, and coverage enhancements, supported by quality underwriting information, remained available for some risks. Some restrictions (e.g., related to Communicable Disease, Coverage Territory, per-and polyfluoroalkyl substances (PFAS), and Strikes Riot and Civil Commotion) remained effectively non-negotiable.

Global Insurance Product Trends

Expand the options below to read a summary of how the insurance market trended in Q4 2023 across key lines of business, including Automobile, Casualty/Liability, Cyber, Directors & Officers and Property.

Q4 2023: Global Insurance Market Overview | Aon (5)
  • Automobile

    Insurer appetite and capacity deployment was dampened by claims inflation stemming largely from higher parts and labor costs, increased accident frequency, ongoing supply chain disruptions, and increasing use of costly-to-repair automotive technologies. Underwriting remained disciplined and focused on risk management and overall portfolio sustainability. Risk differentiation, including the use of telematics and other vehicle safety and driver training initiatives, remained important.

  • Casualty/Liability

    Challenged risk profiles, risks with adverse loss experience, and Umbrella and Excess programs with lower Primary attachment points, experienced moderately challenging market conditions including rate increases, underwriting scrutiny, and capacity limitations. Well-performing, in-appetite risks experienced a more growth-focused environment, including some downward price movements. Social inflation and U.S. exposure – and the potential for “nuclear verdicts” – was a key underwriting consideration and cost driver. Underwriters became more conservative in their per-and polyfluoroalkyl substance (PFAS) mandates.

  • Cyber

    Despite ongoing cyber incidents, buyer friendly market conditions continued, with robust competition and abundant capacity as incumbent insurers sought to retain their renewals and potentially expand their participation, while newer entrants competed aggressively as they sought to develop their Cyber product. Underwriting requirements remained consistent, particularly related to cyber security and other risk management practices. Privacy-related losses remained a key insurer concern, with a specific focus on biometric data and pixel tracking, as well as emerging enforcement of privacy/consumer protection regulations. War and systemic risk also remained a top concern for insurers, and they continued to evaluate, scrutinize, and in some instances restrict coverage offered for critical infrastructure, systemic and/or correlated events, and war. Risk differentiation and evidence of best-in-class security / privacy controls were key to achieving superior renewal results.

  • Directors & Officers

    Buyer-friendly market conditions continued, driven largely by abundant capacity from new and established insurers combined with a lack of new buyers (IPOs, deSPACs, etc.), as well as insurer focus on achieving year-end growth targets. Many insureds sought to reinvest their premium savings in deductible decreases, limit increases, and wording enhancements, which were available for some risks. Rising event-driven litigation and limit aggregation were key underwriting concerns.

  • Property

    Insurers sought profitable portfolio growth through pricing adequacy, targeted appetite, and disciplined underwriting. Modest-to-moderate rate increases continued for most risks while heavy industry and Natural Catastrophe-exposed or otherwise challenged risks, as well as Sabotage, Terrorism, and Political Violence coverages, experienced a more challenging pricing environment. Insurers remained focused on Natural Catastrophe capacity management; however, overall capacity remained generally sufficient as some insurers sought to expand their participation. Detailed underwriting information – including descriptions of valuation methodologies – and early engagement remained key to achieving superior renewal outcomes.

Insurance Market Trends by Region

Expand the options below to read a summary of regional insurance market trends in Q4 2023. For the full details,download the PDF.

  • Asia Pacific
    • Across the region the market has increasingly bifurcated as certain products, locations and segments continued their hardening trend while others – where rates were deemed adequate and insurers were focused on growth – were in a softening cycle.
    • Following almost six years of insurer measures to improve profitability, client organizations continued to look at ways to maximize their captive and self-insurance mechanisms while newly growth-focused insurers faced a relevancy challenge with clients now less receptive to risk transfer.
    • Throughout the year, insurers had mixed success in passing on the increased costs and higher retentions that were required by their reinsurers in the 2023 treaty renewal cycle. The more orderly 2024 reinsurance renewal cycle that played out in Q4 is expected to allow greater (direct) insurer flexibility into 2024.
  • Europe, Middle East and Africa
    • Inflation continued to pressure pricing amidst generally moderate market conditions, although Natural Catastrophe-exposed Property and otherwise challenging risk types, including life science, chemicals, automotive parts, and mining risks, experienced a more challenging market environment.
    • Social inflation continued to impact Casualty pricing for risks around the world, but this was most prominent for U.S. exposed risks. Underwriting rigor for U.S. Auto exposures further strengthened as insurers sought to assess and limit their exposure; robust and detailed information was required, and coverage restrictions were mandated.
    • Cyber and D&O markets continued their softening trend and market conditions were generally buyer-friendly, characterized by premium reductions and enhanced coverages.
    • Auto market conditions were impacted by increasing claims costs. Battery fires and high replacement costs associated with Electric Vehicles were key underwriting concerns.
  • Latin America
    • A positive economic outlook and expected growth, especially in the Construction and Infrastructure sector, drove insurance market optimism; however, insurers remained cautious related to political and economic risks and instability in some countries.
    • Market conditions were moderate overall, characterized by targeted price reductions and sufficient capacity for most risks. Coinsurance was an important lever for risks which experienced limited appetite and capacity.
    • Insurers are closely monitoring Property losses following CAT events in the region such as Hurricane Otis in Mexico and hailstorms in Argentina.
  • North America
    • The market continued to moderate as, over the course of 2023, capital slowly returned, inflation eased, and interest rates positively impacted insurer performance. Q4 was characterized by ample capacity across most of the market. Insurers sought to balance growth with profitability, with a stronger emphasis on growth as year-end budget targets approached. There were a growing number of opportunities to simplify client programs, capture savings and generate competition.
    • A two-tiered market continued, with targeted and well-performing risks experiencing favorable conditions while challenged risks saw continued price increases (although more moderate than in recent years) and some capacity limitations. Risk differentiation and quality underwriting information enabled clients to take advantage of opportunities in the market.
    • Early concerns related to the January 1st treaty renewals faded as the relatively smooth renewal season played out. The rebound in profitability, rebuilding of capital positions and greater availability of retrocession capacity encouraged many reinsurers to display increased appetites.
    • Many clients reassessed decisions made during the hard market and increasingly sought innovative approaches and solutions for reducing balance sheet volatility such as captives, Alternative Risk Transfer, and parametric products.

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circ*mstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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