Market Update

There are plenty of signs of improvement across the market but, with underwriters demanding more and more data, Alison Goodwin, public sector practice leader at Aon, recommends starting early.

Summer is over and, although Spring may feel a long way off, preparations for the April 2025 renewal season are already well underway. Greater data demands from insurers coupled with pressure on resource across the public sector means we’re starting renewal exercises early to ensure clients secure the best possible terms.

An early start and plenty of preparation may be key but there are lots of positives across the insurance market. Some sectors are showing much clearer signs of softening including the property market, where competition fuelled by insurer growth ambitions appears to be leading to more buyer-friendly conditions for most risks. The D&O and cyber markets also have healthy competition and increasing capacity.

Wordings and coverage appear stable with no major shifts in the last quarter and we’re seeing improved interest from insurers. This may continue as the markets soften and insurers look for new areas to offer their capacity, although the results from the winter reinsurance renewal season have yet to be realised.

It’s not all positive though. We’re still seeing realignment of appetite and correction in rates where required or when accounts are not performing well. Similarly, casualty reinsurance continues to come under scrutiny given prior year reserve deterioration.

For the UK public sector, these market conditions mean the need for detailed supporting data has not abated – and it is only likely to continue to grow. Aon is keeping on top of this through regular communications with underwriters and we have adjusted our data collection processes, both at renewal and tender, accordingly. But, with insurers still looking for growth, where they have confidence in the data provided, competitive rates are being offered.

Here’s our round-up of how the market’s performing, line by line.

Casualty

There’s less pressure in the casualty market and we’re seeing lower single digit increases with some tenders even delivering modest reductions. There’s more competition for the right risks but caution should be paid to the sustainability of pricing.

An organisation’s risk management profile is important to insurers and forms part of the overall perception of risk. We’re also seeing greater emphasis on risk mitigation following large losses.

Property

Pressure is reducing across the property market and more long term agreements are being honoured. Again though, data is playing a bigger part in underwriters’ decisions and some public sector organisations are struggling with the requirements.

We recommend engaging with your internal stakeholders early and working with your broker to agree a timetable that allows you to collate the data required.

Motor

Motor is still under the most pressure, as inflation, high repair costs, increased accident frequency and insurers’ combined ratio targets continue to make conditions moderate-to-challenging. More positively, we have seen some very competitive rates at tender, which appear to buck the underlying trend. Again, we would recommend caution with regards to sustainability.

Large fleet risks and those with adverse loss experience faced a more challenging environment, while smaller fleets generally experienced broader appetite and more modest inflationary increases.

Electric vehicles remain a key underwriting consideration. One key factor in pricing decisions will be the changes in your fleet since last renewal. Where there has been a big switch to electric vehicles in the last 12 months, this will have a bigger impact on pricing than for an organisation that went electric prior to last renewal.

Risk differentiation, such as the use of telematics and other vehicle safety and driver training initiatives, remains key to achieving superior renewal outcomes. Some of these services are available as part of your insurer’s complementary risk consulting offering or can be funded through a bursary from your insurer. Your broker can also provide advice on how risk management can benefit your organisation.

Financial lines – professional indemnity and directors and officers

More stability and capacity are filtering through to public sector risks but competition will depend on the precise profile of activities to be covered. Some areas are still struggling.

Most clients include these covers within a package and this will generally provide the best result overall, other than for very specialist covers/activities. Where these risks are not written as part of a package or under an LTA, we recommend remarketing to ensure you’re taking advantage of the increased competition.

Cyber

Cyber crime remains a real threat, with schools, charities and public sector organisations seeing more frequent cyber attacks in 2024, according to a feature in Insurance Times. But, for many organisations, insurers’ high minimum security requirements have put cyber insurance out of reach. This is beginning to change and, at Aon, a more consultative approach has enabled us to obtain cover for some clients who had previously struggled. Involving IT colleagues early and working with underwriters can achieve some good results.

Procurement Act 2023

Originally scheduled for this October, the change of government means the implementation of the Procurement Act 2023 has been postponed and the new regulations will now go live on 24 February 2025.

This delay allows the government to produce a new National Procurement Policy Statement outlining its priorities for public procurement. More details on preparing for the regulations can be found in Richard Scott’s article.

Discount rate

The Government Actuary Department updated the personal injury discount rates for Scotland and Northern Ireland in September. Both increased to 0.50%, from -0.75% in Scotland and -1.50% in Northern Ireland.

The review for England and Wales is ongoing, with a deadline of 11 January 2025 to determine the rate, which is currently -0.25%. However, the announcement for Scotland and Northern Ireland suggests it is likely to increase.

This is welcome news for public sector organisations and insurers. An increase in the discount rate means personal injury claims settlements will reduce, as a result of the higher investment returns that can be achieved when a settlement is invested.

We will keep you up-to-date with the decision on the England and Wales rate but, given the direction of travel we’ve seen in the rates for Scotland and Northern Ireland, it may be prudent to speak to your legal department to determine the impact on any ongoing personal injury claims.

And, while there are plenty of encouraging signs across the market, data remains key to unlocking the best possible terms. Starting early is essential so, if your renewal is in April, expect your documentation and questionnaires to be dropping into your inbox soon.

Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues in over 120 countries provide our clients with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information and use sources that we consider to be 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.

This article has been compiled using information available to us up to 21/10/2024.

Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Aon UK Limited is registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN. Tel: 020 7623 5500