2024 Executive Outlook | Stéphane Lespérance, Aon Canada
Stéphane Lespérance, president, Aon Canada
Since this time last year, market conditions have stabilized and we continue to see a disciplined underwriting approach, with insurers requesting a high level of underwriting data. The property market has shown the most transition due to the impact of climate change and inflation. Consequently, insurers are looking for catastrophe modeling and confirmation of value adequacy. Capital deployment strategies differ among domestic and international markets, influencing the pace of change; depending on an insured’s capital requirements, the timeline to realize the benefits of this transitional market will be different.
To address elevated risk profiles and manage their portfolios profitability, many insurers are taking an aggressive approach towards year-end results, leading to a competitive environment for best-in-class risks, while driving rate increases for poor- performing or natural catastrophe-exposed risks.
Results in 2024 will vary across industries and products, since insurers are managing portfolio profitability with careful risk selection and deploying capacity strategically. Directors and officers liability has become highly competitive, while cyber liability continues to be dynamic, though much more stable following several years of significant activity on the pricing and underwriting process. This highlights the importance of keeping a pulse on the appetites and capabilities of insurers. Look for shifts in their actuarial models, their underwriting bench strength, and the additional talent they recruit to capitalize on the best solutions and partners for clients.
We expect the industry’s general approach to shift slightly next year, particularly for property, depending on the impact of year-end natural catastrophe activity and how the reinsurance treaty renewals of Jan. 1, 2024, play out. Broadly speaking, the changes made last year have put the reinsurance market in a much better position going into this year’s cycle, which should reduce the retentions we’ll see in the primary market next year.
Although market dynamics will certainly impact renewal experiences in 2024, clients should continue to differentiate their risks through a proactive approach and robust risk management practices and information. These factors will help underwriters understand how you are managing organizational risk, apart from solely relying on insurance to be a back-stop in the event of a loss. Options for businesses to reduce their risk include risk control, retention, loss development analysis and managing supply chain or cyber risk exposures.
We’re looking forward to 2024 and another year of supporting clients with their risk and human capital opportunities and challenges, enabling them to make the best decisions for their businesses.
