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Cyber now ‘most strained class of business’: Aon Q3 global study

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Cyber has surpassed D&O and natural catastrophe risk to become the most strained class of business for insurers, according to Aon’s Global Market Insights report for Q3 2021.

The report, which detailed trends across multiple business lines, highlighted carriers’ efforts to remediate profitability issues in cyber, as they continue to see loss frequency and severity related to ransomware, with “rate rises, capacity contraction and sub-limits" becoming more common, as well as more aggressive application of coverage limitations.

In its overview of the broader global landscape beyond cyber, the report stated that new capacity, reduced uncertainty and past pricing adjustments have stabilized pricing for most products, with the most notable exception being cyber.

In its look at reinsurance, Aon’s report found that global reinsurer capital totalled $660bn as of June 30, an increase of $10bn compared with 2020 year-end, driven by growth in both traditional and alternative capital. Aon said this calculation was a broad measure of the capital available for insurers to trade risk.

It also found that new reinsurance capacity is expected to set a record, with $25.1bn of new reinsurance and retro capacity raised in 2020-21 (both debt and equity), the majority of which has come from existing markets.

The ILS market experienced near record issuance volume, with first-half issuance of $8.5bn, while Aon noted that conditions were favorable for record issuance volume for the full year 2021, eclipsing the previous record set in 2020.

Aside from reinsurance capacity, the report also picks up on developing underwriting methods.

Rory Moloney, COO for the enterprise client group at Aon, said: “There is a continued evolution of underwriting practices in the industry as a growing number of insurers transition to centralized underwriting for many risks, and the process becomes more rigorous and data-driven than ever.”

North America regional overview

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In North America, the report highlighted that market conditions continue to stabilize as combined ratios shift, capacity continues to flow in from traditional and non-traditional sources, and pandemic-related underwriting uncertainty subsides.

Aon found that ESG was having a growing impact, and insurers were experiencing notable pressure from lobbyists around the globe to withdraw from some risk types.

The industry is also experiencing a “war for talent”. Aon said talent shortages and resource pressures that existed pre-Covid had been exacerbated by a pandemic-driven shift in workforce behavior and mindset.

US Q3 market dynamics

Aon’s report also singled out US market dynamics for several classes.


For casualty and liability, it said general liability rates this quarter had increased modestly, while umbrella and excess lines policies saw slightly higher increases (+1%-10%).

New market entrants have created more competition. Insurers are also concerned about potential latency related to Covid-19.

Capacity is sufficient for most risks and has improved in 2021. However, insureds that buy very high towers of limits are facing constrained capacity, the report said.

Crisis management

Aon noted a general deceleration of rate increases in this business line, and some previously adjusted policies are experiencing flat renewals (1%-10%), it said.

Ample capacity is available for most risks. However, capacity is largely dependent upon the location of the risk (political risk) and/or the type of risk (product recall).


For cyber, rates are currently at >+30%, largely due to ransomware losses continuing to create profitability challenges and insurers continuing to remediate this through pricing adjustments.

Despite sustained cyber losses, very few insurers have completely exited the market, but most are reducing their capacity. Smaller risks are finding some accommodation with InsurTechs.


Rate increases continue into their fourth consecutive quarter of deceleration as more capacity enters the market and drives supply and demand dynamics (+1%-10%).

Industry classes such as food, habitational real estate and chemicals – as well as risks with loss ratios greater than 100% – are experiencing more difficult conditions than well-performing risks.

Capacity varies based on industry class and individual loss performance. It is not uncommon for favorable risks to be over-subscribed, the report said.

Trade credit

Trade credit losses have not materialized as many expected, leading to improved market conditions and increasing risk appetite, the report said.

Conditions are expected to continue, assuming generally positive economic trends and continued less-than-expected claims activity in the class.

Capacity is sufficient, even as many insureds opt to increase their limits.

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