Buyers of commercial insurance continue to hold court over the sellers, according to the latest insurance sector report by Aon.

An excess of capacity, particularly in professional indemnity, and directors’ & officers’ (D&O) lines, has allowed clients to negotiate wider protections and cheaper premiums, Aon’s quarterly market report has shown.

“Rate falls were generally mid to high single digit for the larger corporate risks and slightly higher for buyers in the mid market and SME segments,” Aon Head of Market Services Lambros Lambrou said.

He says retention is the main game in insurance circles, with multi-year contracts and policy enhancements used to retain key clients.

The strong Australian dollar has also led to a re-evaluation of D&O contracts as local insurers check their reinsurance provisions set against the greenback.

Mr Lambrou says while insurance exposure to subprime is “very low”, the fallout from mortgage foreclosures in the US could spur legal action from disgruntled investors.

“There is the potential for class actions to develop from substantial losses sustained in the capital markets which could have knock-on effects in terms of large claims in the professional classes,” he said.

Swiss Re announced earlier this month a CHF1.2 billion ($1.22 billion) writedown from exposure to credit default swaps.