SINGAPORE - Media OutReach - 3 March 2021 - Aon plc (NYSE: AON), a leading global professional services
firm providing a broad range of risk, retirement and health solutions, has released
its Q4 2020 Global Market
Insights Report, which indicates
increased insurance pricing across most business lines globally. In Singapore, the reopening of businesses and
optimism over the vaccination programme has boosted investor confidence and an
economic rebound is expected in 2021. Besides pricing increases, the Singapore insurance
market is moderately challenged when compared to the global market.
Aon's report finds that
more than capital and capacity, macro factors and events such as supply chain
vulnerability, lower investment yields, ongoing economic uncertainty, social
inflation and weather volatility will drive risk complexity in 2021.
Brent Clawson, Chief Broking Officer,
Commercial Risk Solutions, Asia, Aon, said, "The impact of
claims related to COVID-19 for businesses and insurers has not yet been fully
seen. The fluid situation of business interruption driven by regulations,
litigation and the macro-economic environment will continue to bring
complexities to the fore in 2021. COVID-19 has also resulted in claims activity
in other lines of coverage, with numbers and costs likely to increase."
In Asia, pricing
has seen an overall increase. However, the extent of increase varies by several
factors such as business line, sector, geography, renewal vs. new business and whether
the insurer is local.
Singapore trends:
As the COVID-19 situation evolves, a tight market is likely to
continue, at least through the first half of 2021.
- Coverage is stable; however, pandemic exclusions have become
common.
- Credit insurance has become more difficult and is under heightened
scrutiny.
- New shorter-term and micro-insurance products are coming into
the Singapore market.
Market dynamics of key products in Singapore:
- Auto: Following a slump
during the Circuit Breaker period in the first half of 2020, businesses are re-opening
and ridership of private hire fleets is now slowly increasing. As a result of
many months of reduced ridership and fewer vehicles on the road, insurers
experienced favourable claims performance in 2020. In anticipation of a return
to normal traffic patterns once restrictions are lifted, market pricing is seeing
a modest increase.
- Casualty: Pricing and
deductibles are increasing in this field. Many insurers are imposing blanket
exclusions for communicable disease as well as data risk and cyber threats.
Reinsurance costs are escalating, which are likely to keep primary rates
elevated.
- Employer's Liability / Workers Compensation: Premiums
are increasing, mainly driven by changes in the new Work Injury Compensation
Act, 2019 (WICA). In addition to increased benefit levels, insurers now have
the added responsibility of assessing Permanent Incapacities. Some insurers
have appointed third-party providers to make these assessments, thereby
increasing costs for this class of insurance. Insurers are becoming more
stringent in their underwriting requirements and approach in an effort to balance
underwriting guidelines with WICA requirements.
The Ministry
of Manpower (MoM) has mandated a minimum level of the required information,
which has resulted in more accurate insurer ratings and premium changes for
many insureds. Some Employer's Liability insurers are scaling back coverage
related to Contingent Liability, especially for contractors and subcontractors.
As insurers seek more clarity following recent changes to WICA, renewal terms
have changed in ways that have not been experienced in previous updates to the Act.
- Financial Lines: Insurers are leveraging
technical pricing approaches and rationalising capacity at the portfolio level
leading to increased premium and decreased capacity. Insurers are being conservative
in their scrutiny of insureds' financial positions, operations (including
return-to-work policies), controls and governance. Companies that are in
industries severely impacted by COVID-19 and/or have weak financials will
likely see narrowing coverage with little room for negotiation.
- Property: Insurers are imposing
Communicable Disease Exclusions, withdrawing Contingent Business Interruption
coverage and imposing Cyber exclusions on Property Damage and Business Interruption
(PDBI). Deductibles are increasing, particularly for Business Interruption for
Singapore risk locations. Insurers continue to reduce capacity as they focus on
diversification of risk, and a further reduction in capacity is expected as
reinsurance rates continue to increase.
Insurers are reacting to recent losses and uncertainty by focusing
their appetite and withdrawing capacity. In some cases, new terms and
conditions are being required to renew coverage. With the centralisation of the
underwriting function and an increased focus on profitability, insurers are no
longer looking at risk through the same local lens.
Insureds are also more mindful of pricing given the current
economy. Many insureds, especially those whose budgets are not aligned with
current market conditions, are exploring alternatives and trade-offs (e.g., increasing
deductibles) to offset proposed premium increases.
Cynthia Beveridge, President, Aon
Broking, Commercial Risk Solutions, Aon, said: "There is
general optimism that the rollout of the COVID-19 vaccine will have a positive
economic impact. Along with the introduction of additional capacity into the
market, this may result in an easing in the second half of 2021 of some of the
challenges experienced in the risk and insurance environment during 2020. That
said, risk complexity will continue to be impacted by supply chain
vulnerability, a virtual workforce, ongoing economic uncertainty, social
inflation and weather volatility. We expect heightened underwriter scrutiny on
supply chain transparency and resilience, COVID-19 and communicable disease
safety measures and cyber threat resilience. Pricing and coverage terms will
continue to address these concerns."
Notes to Editors
Learn more about how
organisations are navigating new forms of volatility, one of their four core
priorities as they have shifted in response to the COVID-19 pandemic, in Helping Organizations
Chart a Course to The New Better.
The issuer is solely responsible for the content of this announcement.