LONDON, 29 September 2005 – Multinational companies looking for protection against their liabilities, demand greater innovation from the insurance industry and would like to see underwriters respond to emerging risks by offering broader cover and new products. This is one of the main conclusions from new research* conducted by Aon Limited among European headquartered companies and general liability insurers. 

One third of the companies surveyed expressed doubt as to whether the insurance market is doing enough to provide cover for new threats. In particular, corporate buyers would like to see more activity from insurers in the area of terrorism, electro-magnetic fields, nano-technology, reputation, pollution and internet exposures

In contrast, only 9% of insurers see emerging risks as their priority, and most liability underwriters show a reluctance to cover tougher risks.   Employment-related risks such as industrial disease and workplace litigation, food industry exposures, pollution and the evolving legal environment are giving liability insurers most cause for future concern. 

Corporate buyers also expressed particular concern over existing coverage restrictions in the areas of product liability, product recall and product exclusion, and over policy limitations on US exposures. Many buyers would prefer the option of additional cover instead of lower rates. 

General liability rates are generally softening or stable, with 73% of underwriters reporting lower or flat rates and average reductions of between 1%-20% (employers’ liability and pharmaceutical risks were consistently cited as suffering rate rises).   As a result, profitability remains the top priority for all insurers, with two thirds of general liability underwriters identifying sustained profitability and rating adequacy as their biggest challenge. 

Against this backdrop, the survey shows an ongoing trend for businesses to retain more risk themselves.  Almost half of all general liability buyers currently use a risk retention vehicle such as a captive or protected cell company, with a further 25% willing to consider the prospect of retaining risk themselves.  In addition, over half of the respondents say they would consider significantly increasing their general liability retention in 2006 in order to reduce the cost of risk transfer. 

Commenting on the report, Simon Thompson, Director, Aon Limited, said: “Our report highlights that European companies are increasingly motivated by policy cover when purchasing their liability insurance cover.  Their main cause for complaint is the lack of market innovation in the face of new risks and existing coverage restrictions.”

“The insurance industry needs to recognise and respond quickly to this need in order to protect their own future profitability. If buyers cannot buy the cover that they need in the market, they have every incentive to continue the move towards self-insurance. Once buyers become used to the philosophy of higher retentions or captives, the business retained and its consequent premium volume is usually lost to the insurance market for good.”

*Copies of the full Aon survey, ‘2005 European General Liability Market Survey’, will be available from 3 October. Please email sally.taylor@aon.co.uk for a copy, or see www.aon.co.uk.



Notes to Editors

About the survey

The survey was completed by 35 European domiciled insurers and 38 European headquartered multinational companies during July 2005. The respondents were drawn from a wide range of industries including: pharmaceuticals, electronics, tobacco, transport, chemicals, leisure, steel, financial services, automotive, energy and waste management.
About Aon

Aon Corporation ( http://www.aon.com ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 47,000 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.

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