Property and cyber markets remained challenging in the Asia Pacific region in the fourth quarter, while moderate conditions were seen in motor, casualty and liability, and trade credit, a report from Aon says.

“Insurer focus on profitable growth and retention continued. Underwriting remained selective and valuations remained under scrutiny,” the report says.

“Risks in parts of the region that are susceptible to natural catastrophe events such as heavy rainfall, typhoon and drought, which continue to increase in frequency and severity, experienced challenging market conditions which were exacerbated by lagging loss modelling.”

Directors’ and officers’ cover was the only soft area, as a result of a continued drop in class action filings, fewer corporate insolvencies than expected and new capacity.

Pricing across the region increased 1-10%, while capacity was sufficient for most products with the key exceptions of cyber, terrorism, products liability/recall and natural catastrophe-exposed property.

The regional overview also says insurers with cumbersome referral processes and centralised underwriting authority were in some cases challenged to compete with agile insurers able to provide timely responsive capacity and quotes.

Aon Commercial Risk Solutions CEO Lambros Lambrou says globally key issues last year included the Russia and Ukraine war and surging inflation, and the economic landscape is likely to remain fragile for some time

“These challenges, as well as others related to cyber, supply chain, food security, climate transition, energy security, ESG and public sentiment are likely to create new pressures on businesses over the medium to long term,” he says.

“Since these risk areas are evolving and highly interconnected - as we have seen firsthand with the geopolitical conflict - it is ever more vital that businesses commit to building resilience, including maintaining a well-informed, broad strategic approach to risk.”

Aon says inflation has driven up loss costs for insurers and impacted pricing, although it’s too early to know the impact on longer-tail lines as claim factors, such as medical and litigation costs, take time to unfold.

“As costs rise, insurers may need to rely more on operational efficiency and investment earnings to help minimise any shortfall between premium revenue and claims payouts,” it says.

Aon says the prominence of long-term hybrid working, the rise in ransomware and widespread data breaches will drive cyber security investment, but a skills shortage is expected to continue in the next three years, while criminals are employing new tools and techniques to bypass robust security measures.

Insurance will continue to play an important role, and there’s been a marked shift in the cyber market, which has become more buyer friendly compared to earlier last year, the report says.

“Analogous to some other lines of coverage, we expect insurers and others to move to a fast-track approach for lower cost claims, allowing technical resources and appropriate time to be dedicated to more complex situations,” Aon says.

“We anticipate more engagement of a claim advocacy process and less immediate involvement of external counsel representing insureds and insurers as the legal costs associated with cyber claims continue to mount.”