United Kingdom

Market Update

It’s almost 12 months since the World Health Organisation declared the coronavirus outbreak a pandemic, triggering a significant overhaul of just about every aspect of life. As well as leading the fight against COVID-19, with millions of employees on the frontline looking after the sick and vulnerable, additional responsibilities such as school and community testing and asymptomatic testing of students in higher education have fallen to the public sector in the last few months.

It’s also likely that more public sector organisations will find themselves involved as the vaccine rollout continues. While this brings additional pressures on resources, the fact that the vaccine is being seen as the route back to normality does give something positive to focus on.

Aon is also looking to the future through its Work, Travel, Convene coalition, which has brought together many of London's biggest employers to create a collection of insights focusing on the specific risks we are currently facing. While based (virtually) in London, there are key messages we can all take away. You will be hearing more about the public sector perspective on the learnings in the coming months, as it is clear that workplace health is a strategic imperative for all organisations. You can also join us on Thursday 4 March for our webinar COVID-19 elevating health to a strategic priority for public sector organisations. This should be a truly memorable and insightful session in shifting how we think about the role of mental and physical health in our public sector organisations and the unforeseen opportunity that the pandemic has created. For this webinar we are delighted to welcome guest speaker Geoff McDonald. Please click here for more information and to register for this event.

COVID-19 and the insurance market

The insurance market has not been immune to the effects of COVID-19. On the claim side, insurers were dealt a significant blow when the Supreme Court ruled largely in favour of policyholders in the business interruption case. This will see thousands of small businesses receiving insurance settlements, at a cost of hundreds of millions of pounds to the insurance industry.

Travel claims relating to COVID-19 have also hit the insurance sector hard. These have mostly been settled now but we expect the cost of this to feed through in rating increases. Some insurers are issuing ‘known event’ exclusions and we’re also seeing exclusions for medical cover for COVID-19.

COVID-19 has also meant changes in wording have become standard in respect of property covers and we are starting to see some in relation to public liability and even employers’ liability covers. Exclusions do differ and some are very loose in their definition, for example excluding all activities directly or indirectly related to COVID-19.

Insurers are also beginning to see liability claims relating to COVID-19, especially relating to transmission. As it is very difficult to prove where infection took place, insurers are taking a robust stance on this and pushing for evidence to support claims.

Insurance market outlook

These factors feed into an insurance market that is already under incredible pressure. Global catastrophic events, limited investment income opportunities, increased claims costs, global economic uncertainty and increased reinsurance costs mean the market is continuing to harden. We’re seeing rate increases across most classes of business, with some hit harder than others, and many insurers are conducting full rate reviews of their entire books.

Against this backdrop, it is more important than ever to start the renewal process early. Having all the information ready to present to insurers will help organisations secure the best possible terms.


We’re still seeing rating increases and this trend is likely to continue through 2021. Latest data suggests that average increases will be between 10%-20%. Most insurers have introduced COVID-19 related business interruption exclusions, which will apply from renewal. As well as rate increases and exclusions, insurers are also taking a stricter approach on the information they require, with this even being seen among those that were previously more relaxed. Because of this, we strongly recommend that you review your valuation procedures and start a project to revalue all your assets over the next 18 months. Some insurers are making regular valuations a requirement with target dates attached and reduced cover potentially applying where this is not already in existence. More information on what they expect, and what organisations need to consider with property valuations can be found in our Client Director, Heidi Dennis’s article in the Autumn edition of ALARM’s Stronger magazine.

(Stronger | ALARM (alarmrisk.com))


Although motor remains a challenging market, with small increases being sought by insurers, there is still some competition for most risks, except blue light. For most cases, increases are approximately 5 – 10%, although larger increases are being seen where a deteriorating claim experience supports this. However, while it lags behind liability when it comes to increases, it is catching up.

Other notable features of the motor market include no rebates for laid-down vehicles and insurers monitoring claims trends on electric vehicles. We’ll keep you up-to-date on how their findings might affect public sector organisations.


There are some signs of relief in the liability market where, although rate increases are still being requested, they are lower than in 2020. This year, there’s clearer reasoning behind any increases, with factors such as a change in exposure, a poor claims record and increased reinsurance costs the key drivers. Where there’s no obvious reason for a premium hike, we recommend pushing back to get more information from the insurer. That said, where insurers are just seeking to pass on reinsurance costs, we are still seeing increases of approximately 5%-25%, and higher where the claims experience has deteriorated.

There is still plenty of uncertainty in the market due to the potential for future COVID-19 claims. The nature of these is still unclear but could include claims for employee stress as a result of working on the frontline, being exposed to increased risk in the community or as a result of home working/schooling.

To manage this potential liability, exclusions for communicable diseases are commonplace now and, if not already in place, will be applied from renewal.

Financial lines

There are no signs of the hardening slowing across financial lines such as PI, D&O and crime and fidelity guarantee cover. Capacity is severely reduced, which means insurers can be really picky.

Some have imposed minimum increases of 100% across their whole book of business and, as interest in new risks continues to dwindle, negotiation with existing markets is the only option in some cases. We’re also seeing some insurers only offering renewal on lower limits and, to add to the pain, terms are often being provided late.

It’s still unclear how the new year reinsurance negotiations will affect this market and we’ll keep you posted in the next update. However, we recommend starting the renewal process as early as possible; providing detailed information and expecting clarification questions; and budgeting for large increases.


Increased cyber exposure due to new ways of working and increased activity by cyber criminals has seen an increase in interest in cyber cover by public sector organisations in recent months. Many are still working through insurers’ proposal forms.

The fast pace of change and frequency/cost of claims relating to this cover means that both underwriting requirements and premiums are changing regularly. A consultative approach to underwriting appears to be favoured by some insurers and underwriters are making themselves available to meet with interested organisations to gain a greater understanding of their risk prior to providing quotations.

For those who already have cover, increases should be expected at renewal, and it is looking like these will increase further as we progress through the year.

Brexit…..watch this space

The insurance market could also be affected by another major news event – Brexit. Although the UK government was able to secure a last-minute post-Brexit trade deal with the European Union, there was one notable exclusion – financial services.

Companies in the sector have long prepared for the possibility of such an outcome, with insurers adjusting their operating models to enable them to continue trading in the UK. Aon has also taken steps to ensure clients can access the cover they need, strengthening its Brussels office to facilitate access to the EU market. Access to other non-EU global placements is unaffected. As negotiations continue, there is the potential for this all to change.

With the UK outside of the EU, further changes are also likely that might affect public sector organisations’ operations and risk profiles. This could include new legislation around areas such as workers’ rights, supply chain and infrastructure issues.

As more detail emerges, we’ll keep you posted on how it will affect your organisation.

For more information about any of the topics in this market update please speak to your account manager or contact Alison Goodwin, National Public Sector Practice Leader at Aon, on [email protected]