Widespread rate increases have not occurred in the SME market, according to a new report by Aon.

But for those SMEs that have exposure to physical risks in natural catastrophe zones, rates have risen dramatically and in some cases insurers have refused to provide cover.

But the current economic climate has spared other SMEs from excessive rate rises, the report says.

“The realities of a commercial marketplace and tough economic times have contained the insurance costs for most other policyholders,” it said.

“Competition is still strong for the most profitable risks, but each insurer has an entirely different perspective of what is profitable to them.”

Aon says property insurance clients have experienced either a rollover of their policy on the same terms, or a modest reduction of between 5 to 15%.

“The outlook for the balance of 2011 is for a continuation of the ‘micro-underwriting’ stance, as this is allowing insurers to price-differentiate varying types and qualities of risks to maximise profitability,” the report said.

Discounting is also continuing in the liability area due to some additional capacity in the marketplace.

Aon says clients with a poor claims history will not be enjoying these discounts and in some cases higher premiums are being applied to those with unprofitable risks.

Professional indemnity rates have remained stable, but competition from insurers is starting to push rates down in certain professions.

Aon notes increase insolvency activity is causing concern for insurers in the directors’ and officers’ liability area.

But insurers are treating directors and officers in SMEs more favourably than those running larger organisations.

Personal insurance policies have increased by up to 10% as insurers try to bring their portfolios back to profitability. 

The Aon report predicts further rate rises in both motor and household policies, but it notes the effects of the earlier natural catastrophes still haven’t been priced in yet.

Despite some sectors struggling, the broker sees the overall industry as being in good shape.

“We believe that with the ample capacity available, premiums will remain relatively stable during 2011 unless further substantial catastrophic losses occur,” it said.