Like the two-tier economy, Australia is also seeing a two-tier pricing model, Aon Chief Placement Officer Bob Mann says.

“Pricing is now driven by perils so it is now geographic,” he told an Aon conference in Melbourne last week.

“In areas not affected by (this year’s) catastrophes, we are seeing single-digit renewals, but in the peril zones there are big increases.”

Mr Mann says underwriting outside the peril areas is still very competitive with good rates and deductibles.

“We are still seeing new players come into these areas and other classes haven’t been impacted by recent events,” he said.

“Classes such as professional indemnity are still competitive, but they are volatile and if they were exposed to a major event, then pricing would shift.”

Aon Global Broking Centre CEO Lambros Lambrou says historically we are heading towards a hardening market, but there is a two-speed pricing cycle in global markets.

“People are saying that in 12 to 18 months we will be in a hardening pricing cycle, but we are questioning that,” he said.

“We see a disjointed pricing cycle where there are some changes at a local level due to catastrophes, while in other areas the lack of economic growth is not putting pressure on pricing.

“Demand for insurance is sluggish in the global marketplace.”

Mr Lambrou says the oversupply of capital means insurers can handle major catastrophes better and that has implications on pricing.

“(Capital) supply is outstripping demand so that is why there is competition on pricing,” he said. “Larger balance sheets are helping insurers digest major disasters and capital is more fluid.”

Mr Lambrou has warned against using historic trends to predict the next hardening rate cycle as the global price outlook is changing.

“Geography and specialisations are feeling the pinch,” he said. “But supply and demand is becoming more important to the global market and that is leading to our two-speed pricing cycle.”