Commercial lines pricing in Australia and the broader Pacific region was flat in the first quarter amid “abundant” underwriting capacity, broker Aon says.

The quarter also featured strong buyer interest in parametric solutions – insurance that pays out if pre-defined event parameters are met or exceeded – with take-up rates continuing to grow dramatically, especially for distressed perils and locations.

“Capacity was abundant as new entrants and re-entrants boosted competition in the mid-market space,” the broker’s global market report says.

“Large, complex and more challenging risk profiles drove demand for alternative risk transfer solutions to insulate against market cycles and provide greater stability over the long term.”

For Australian commercial clients in peak cyclone areas, capacity has been “constrained” because some insurers have allocated natural catastrophe underwriting capital to join the cyclone reinsurance pool. Participation is mandatory for general insurers with eligible policies and large insurers were required to join by the end of last year.

By product line, the Australian motor market was rated “moderate”; casualty/liability was challenging; cyber was soft; directors’ and officers’ was soft; and property was moderate.

Across the Pacific market, the motor line continued to be hit by increased repair costs and delays around spare parts caused by global supply chains.

“Insurers remained prudent and continued to impose rate increases and higher deductibles on claims-impacted risks while demonstrating flexibility on well-performing risks,” Aon says.

“The adoption of electric vehicles – with enhanced technology components – increased average replacement costs.”

In property, conditions are still improving after years of adjustments to address increased reinsurance costs and natural catastrophe volatility.

However, some areas remain challenging, such as Hawkes Bay in New Zealand after Cyclone Gabrielle last year.

In Australia, in-appetite risks started to experience a more growth-focused, competitive environment. “Incumbent insurers were generally unwilling to provide rate reductions, but it may be a matter of time before increased price competition serves to change their position on this.”

In casualty/liability, insurers continued making changes to improve performance, including rate increases, higher deductibles and reduced coverages on underperforming risks.

In cyber, market conditions remained favourable despite a spate of high-profile breach incidents affecting Australian organisations and millions of individuals over the past five years.

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