Costs incurred from emerging risks continue to rise amid evolving insurance market volatility, according to Aon’s Global Market Insights Report for Q4 2021. The report identifies four key trends in the current changing market, including heightened exposure and supply disruption triggered by the COVID-19 pandemic, which has also caused price increases, capacity restrictions and more stringent underwriting. In addition, Aon describes cybercrime as “thriving” and growing in complexity, quoting a 400 per cent increase in ransomware attacks between Q1 2018 and Q4 2020. Higher economic losses are also attributable to natural disasters exacerbated by climate change, and insurers are increasingly focused on ESG risks that can arise from interconnected factors related to the evolution of business practices and operations. In the report, Richard Waterer, global risk consulting leader at Aon, explains: “These new forms of volatility are evolving and shaping the way organisations make decisions. In some cases, they emerge from established risks that are changing and accelerating; in others, they arise from genuinely new exposures. “For business leaders and risk professionals there is pressure to understand, size and treat these risks. For the insurance industry and other providers of capital, there is a race to innovate and develop solutions for the growing proportion of the risk portfolio that is uninsurable.” The report observes the continuation of a positive rate environment, although it notes that increases have moderated and volatility has stabilised, with the distinct exception of cyber. The report says: “The cyber landscape is becoming increasingly complex and volatile, with frequency and severity of loss events continuing to challenge insurers and clients. Market conditions remain difficult, with rigorous underwriting along with significant rate and deductible increases. “Some insurers are imposing coverage restrictions, sub-limits and capacity limitations on ransomware. Global aggregation of losses is a key concern, causing a contraction in global capacity.” For other lines of business, Aon notes that market conditions have moderated for casualty and liability, although underwriting concerns continue to include ESG-related risks, climate change, pharmaceuticals, cyber and social inflation. Market conditions have also moderated for directors and officers liability (D&O) as new capacity has become available, although COVID-related concerns are likely to persist for some time.
