Insurance broking in North America has become more innovative and symbiotic, according to Aon’s new report, ‘Global market insights Q2 2021’. The report identifies that industry professionals are collaborating more across risk, consulting and reinsurance to support risk assessment and risk financing, as well as exploring alternative capital and captive feasibility evaluation. Looking at the US in particular, Aon determines that cyber coverage has high underwriting scrutiny with significant rate increases, while casualty and liability has difficult coverage negotiations as underwriters are especially restrictive on wording related to communicable diseases and pandemic exclusions. Aon’s report also notes that in Latin America, rate increases and policy restrictions are generally less intensive; at the same time, cyber coverage continues to explore alternative risk transfer methods such as captives. More generally, Aon recognises new capacity in the global insurance market, described as “tight but sufficient”, as well as more detailed and rigorous underwriting standards as insurer decision-making becomes more centralised and new capital in the market causes reinsurers to continue to evaluate new areas for growth. The insurance-linked securities (ILS) market in Q2 2021 was described as "record-setting", with robust momentum for both investors and sponsors. For Q3, Aon predicts that additional capital in the ILS market will be reallocated into the cat bond space, owing to the focus of many investors on liquidity and a reduced risk tolerance. Aon also recently released its revenue statistics for Q2 2021, reporting a 16 per cent year-on-year increase in total revenue to $2.9 billion, including an organic revenue growth increase of 11 per cent. The organic revenue of commercial risk solutions grew by 14 per cent, which Aon attributes to strong new business generation, retention and management of renewal book portfolios. Aon’s risk solutions segment encompasses casualty risk management, business continuity risk management, environmental risk services, and captive insurance, management and consulting. In its Q2 2021 report, Aon notes core property and casualty coverage remained strong across North America, Latin America, Asia, Europe, Middle East and Africa. In addition, transaction liability, construction and cyber consulting indicated “significant growth”, following a negative impact in Q2 2020. Elsewhere, reinsurance solutions’ organic revenue growth increased by 9 per cent, with Aon stating this reflects growth in treaty, supported by net new global business generation and capital markets transactions. Aon’s reinsurance segment covers risk transfer, claims advocacy and capital management solutions for speciality practice groups, including environmental, terrorism, cyber, general liability and workers’ compensation. Operating income increased to $672 million, while total operating expenses increased by 16 per cent as a result of transaction costs related to the terminated proposed business combination with Willis Towers Watson, which requires Aon to pay a $1 billion termination fee. Greg Case, CEO of Aon, comments: “The results demonstrate the incredible resilience of our colleagues and the power of Aon United. We are moving forward at an accelerated pace, with a proven leadership team and an enduring strategy. Our ability to innovate on behalf of clients remains unrivaled and continues to translate into significant progress against key financial metrics and shareholder value creation.”
