LONDON, 26 July 2006 – The Asian insurance market remains highly competitive and is expected to become even more so, according to the latest ‘Asia Property, Liability and D&O Report: Buyers bask as sellers sweat’ to be launched by Aon at the 23rd East Asian Insurance Congress in Brunei Darusalam next week.  Underwriters are expecting further pressure on already declining rates and increasing competition from outside the domestic market, particularly Australia.  At the same time many buyers are managing to achieve more coverage for their money. 

However, it is not all doom and gloom for the sellers.  Claims are low and many buyers are expanding their businesses with a corresponding growth in their insurance needs, while inward foreign investment is creating further demand. 

“While we continue to see a reduction in rates, we also expect to see growth in the overall size of the premium pot,” said Oliver Schofield, leader of Aon’s Global Property Practice.  “Economic prospects for the region in the medium term remain bright.  The non-life insurance sector is forecast to grow by 2% in 2007, or just under 9% if you exclude the Japanese market.  Despite declining rates, Asia remains a very attractive market.”

Simon Thompson, leader of Aon’s Global Liability Practice, commented, “Buyers of general liability continue to enjoy rate reductions, or stability at worst, in almost all cases.  Perception of emerging liability risks is rising in the region but awareness still falls behind their European peers.  This will be a factor for both buyers and insurers in the near future as Asian corporations continue to expand their operations globally.

“Asian insurers are, however, enjoying healthy growth in their directors & officers’ premium volume.  Limits are being purchased for the first time by some buyers and increased by others as corporate governance measures bite and foreign capital raising elevates risk exposures.”

The main findings of the report show:

Property

• almost 50% of buyers report reductions of 10% or more in the last 12 months and more than half are expecting further reductions going forward;
• underwriters do not anticipate any rate rises next year with 75% expecting further reductions;
• four out of five underwriters say they are willing to offer policy enhancements in exchange for no reduction in rates, while around 50% of buyers say they would be interested in such a deal;
• risk information is improving but insurers believe buyers could do better;
• buyers are considering different programme structures including captives.

General liability

• 50% of buyers report lower premiums in the last renewals with one in five seeing reductions in excess of 10%;
• around 50% of buyers are hoping for further reductions, but 40% expect rates to remain stable;
• underwriters are divided equally between those expecting further reductions and those hoping for stability;
• buyers appear to have a limited knowledge of emerging risks;
• buyers are considering greater use of captives.

Directors & officers

• 80% of buyers report falling rates with over half reduced by 10% or more;
• insurers report growth in the market over the last 12 months;
• buyers’ awareness of D&O is increasing, but a minority still have no cover.

Aon’s ‘Asia Property, Liability and D&O Report: Buyers bask as sellers sweat’ is based on a survey of 65 insurance buyers and companies based in Asia carried out during June 2006 and builds on a similar report on the Asia property market published in September 2004.  The countries covered include: China and Hong Kong; India; Indonesia; Japan; Malaysia; Pakistan; Singapore; South Korea; Taiwan; Thailand and Vietnam.  Industries represented include: airlines; automotive and industrial engineering; computer screen manufacturing; electronics; pharmaceuticals; printing and publishing; real estate; semi-conductors; steel and telecoms.

About Aon

Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, our ability to execute the stock repurchase program, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by state attorneys general, state insurance regulators, federal prosecutors, and federal regulators, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, and ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.