Market Update

Further signs of improvement are emerging in the public sector insurance market. But, as Alison Goodwin, public sector practice leader, at Aon, explains, early engagement, detailed information and a robust approach to risk remain key to securing the best outcomes.

With the summer drawn to a close, and another April renewal season behind us, it’s reassuring to see increased signs of improvement in the public sector insurance market. But, with challenges remaining in some markets and for some organisations, early preparations are a must.

In Q2 2025, the market shows increased stability across most lines, with much clearer signs of softening across some sectors of the market. Pricing finally appears to be moderating after the hard market years we’ve seen recently.

This stability can also be seen in wordings and coverage, with no major shifts in the last quarter. Some organisations are using this as an opportunity to review limits and coverage and increase their coverage.

In some cases, especially for cyber insurance, organisations are even securing lower premiums. Against a backdrop of continued increases in cyber activity and some high-profile cases, this is great news for policyholders.

But it’s not all positive. While the general insurance press is full of tales of a soft market, there’s much less of a wholesale shift in the public sector market. Here, insurers remain disciplined and selective, particularly where claims experience or risk management is suboptimal. We’re seeing realignment of appetite and correction in rates where required and accounts are not performing well.

BOX: Market snapshot

	Motor	Casualty/Liability	Cyber	Financial Lines	Property
EMEA	Challenging	Moderate/Soft	Soft	Soft	Moderate/Soft

What does this mean for the UK public sector?

These are our key takeaways for anyone planning ahead for the next renewal season:

The need for detailed supporting data has not abated – and is likely to continue to grow. Aon is keeping on top of this through regular communication with underwriters and we have adjusted our data collection processes, both at renewal and tender, accordingly.
Insurers are still looking for growth. The most competitive rates will be offered where insurers have confidence in the data.
Insurers are looking for impactful risk management, especially in relation to cases where claims are likely to play a part in premiums.

This attention to detail from the insurers means that accurate risk data, robust controls, and early engagement are key to achieving the best outcomes.

To help you focus your preparations, here’s our round up of how each area is performing.

Property

Pressure’s reducing in the property market and more long term agreements are being honoured, although some insurers are seeking small increases – generally, moderate single digit – to secure the stability of their book. Average increases across the UK currently stand at +2%, although risks with poor loss histories, high catastrophe exposures, or underinsured values may still see higher rate demands.

Data is still playing a major part, and some public sector organisations are struggling with underwriters’ requirements. To be able to provide them with the necessary information – and secure the best possible terms – we recommend engaging with your internal stakeholders early and working with your broker to agree a timetable that allows sufficient time for data gathering and remarketing if required. Where LTAs are broken, subject to circumstances, alternatives may be available.

Claims trends: Claims inflation continues, driven by rising repair costs, supply chain issues and the increased frequency of weather-related events.

Key considerations: Accurate valuation and robust risk management are critical. We are encouraging our clients to update building valuations and invest in risk mitigation.

Cyber

Cyber security breaches and attacks continue to be a significant threat with a report in Insurance Times highlighting ‘more frequent’ cyber incidents across schools, charities and public sector organisations in 2024.

As the risk rises, the good news is that it’s getting easier to secure cover. The cyber market has transitioned from the hard market of 2022-23, where increases of up to 40% were not uncommon, to a more stable environment. Rates have plateaued and some clients are even seeing reductions, especially those with strong cyber hygiene and controls.

A more consultative approach by Aon colleagues has led to success in getting cover placed for some clients who have previously struggled. Involving IT colleagues early and working with underwriters is key to getting good results.

Improved competition and new market entrants have improved capacity but underwriters do continue to require detailed information on controls such as multi-factor authentication (MFA), endpoint detection and response (EDR) and incident response planning.

Claims trends: Ransomware remains a key threat, but improved policyholder security has reduced the frequency and severity of claims. Insurers are closely monitoring regulatory changes and systemic risk exposures.

Key considerations: Continued investment in cybersecurity, regular staff training, and robust incident response plans are essential for maintaining favourable terms and pricing.

Motor

Still under the most pressure, the motor market is experiencing ongoing rate increases, albeit at a slower pace than in previous quarters. We’ve even seen some very competitive rates at tender which appear to buck the underlying trend. Capacity remains adequate but inflation, high repair costs, increased accident frequency, and insurers’ combined ratio targets continue to pressure the market and conditions remain moderate to challenging.

Large fleet risks and those with adverse loss experience faced a more challenging environment, while smaller fleets generally experienced broader appetite and more modest inflationary increases.

Electric vehicles remain a key underwriting and pricing consideration. One key factor will be the changes in your fleet makeup since last renewal – for example if you have made a big switch towards electric vehicles in the last 12 months. A recent switch will have a big impact on pricing, compared to an organisation that made this change prior to last renewal. Some fleets are mature in their move to electric vehicles and underwriters will take this into account.

Risk differentiation, including the use of telematics and other vehicle safety and driver training initiatives, remains key to achieving superior renewal outcomes. Some of these services are available as part of your insurer’s complementary risk consulting offering or can be funded via a bursary from your insurer. Speak to your broker to learn more about how risk management can benefit your organisation.

Claims trends: Claims frequency is returning to pre-pandemic levels, with inflation in repair, parts, and labour costs driving up average claim values. Electric vehicles present new challenges for repair and replacement.

Key considerations: Telematics and fleet management technologies are increasingly important for risk selection and pricing. Insurers are encouraging proactive fleet risk management to control claims.

Liability (Employers’, public, and product)

There’s less pressure in the liability market and most policies are renewing within long term agreements. We’ve even seeing some tenders delivering savings for clients with good claims records.

There’s more competition for the right risks, but caution should be paid to the sustainability of pricing. Risk management profile is important and forms a key part of the overall perception of your organisation’s risk. There’s also greater emphasis on risk mitigation following large losses.

Claims trends: Claims costs are rising due to increased litigation, higher court awards, and inflation in medical and legal expenses. Emerging risks, such as those related to environmental, social, and governance (ESG) factors, are under greater scrutiny.

Key considerations: Strong risk management, clear documentation, and proactive claims handling remain essential for securing competitive terms.

Financial lines (Professional indemnity and directors and officers)

More stability and capacity are filtering through to public sector risks and we’ve seen flat rates but also some reduction due to increased competition. The amount of competition depends on the precise profile of activities to be covered, with some areas still struggling as they cause more concern to underwriters.

Most clients include these covers within a package and this will generally provide the best result overall, other than for very specialist covers and/or activities. Where these risks are not written as part of a package or under a long term agreement, we recommend remarketing to ensure you are accessing the most up to date pricing.

Pricing pressure - tariffs

Trade tensions, particularly those involving US tariffs and retaliatory measures by global trading partners, are affecting claims costs, especially through price inflation.

The imposition of tariffs is having a measurable effect across supply chains, with insurance-linked costs rising accordingly. For example, the latest Crawford report on tariffs and claims inflation indicates that rising material costs are expected to add an average of $10,900 to a newly built home. This is just one example, but with repair and replacement costs the largest driver of claims inflation, the consequences for tariff-induced higher prices are far-reaching.

We’ll keep a close eye on how tariffs feed through into insurance pricing over the next few months but, whatever the result and the political fallout, the key message for public sector insurance managers remains the same – early engagement, detailed risk information and robust risk controls are a must.

Higher Education Sector

Broadly speaking the HE Sector has followed the Public Sector insurance market trends, however there remain sector specific challenges linked to ongoing financial pressures (including demographic shifts and the recruitment of foreign students), increased competition together with political and legal/regulatory changes. Universities are increasingly looking toward further diversification of income streams, expansion of existing franchise operations, both in the UK and overseas, partnerships with business and leveraging research/intellectual property. New construction projects have been frozen or scaled back, with focus increasing on the maintenance and improvement of the existing estate – albeit budget restrictions are placing pressure on this.

Claims trends: Student clams and complaints relating to course provision due to the pandemic/industrial action continue to be seen, as well as claims arising from issues with course accreditation. Cyber incidents and fraud/phishing remain a significant threat, and for property, escape of water and storm damage caused by severe rainfall are becoming more frequent and difficult to predict.

Key considerations: FOI requests can provide an early indication of potential claims, and should be flagged up should these raise concern. Early engagement with insurers remains key overall, particularly where planned changes may increase risk – this could range from greater online course provision, increased travel to higher risk territories and the installation of Photovoltaic Panels/EV charging points to a university estate.

Enjoy the run up to Christmas (sorry!) and we’ll keep you updated with any changes in the market.

About Aon

Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues in over 120 countries provide our clients with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information and use sources that we consider to be reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

This article has been compiled using information available to us up to 01/09/2025.

Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Aon UK Limited is registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN. Tel: 020 7623 5500.