United Kingdom

Market update

Like many other markets, the public sector insurance market remains unpredictable and volatile and, as Alison Goodwin, public sector practice leader at Aon, explains, the impacts of inflation, supply chain pressures and the cost of living are starting to bite. Time and more than ever before, detail remain key to securing the best possible terms.

We’ve been through two of the major tender and renewal bottlenecks – April for local authorities and August for universities – and it’s fair to say it’s been a busy year.

The hard market continues, although it feels more targeted to specific risks or lines of business. Lots of clients have changed insurers and some of the pricing has been surprisingly low, leading to concerns over long term agreement sustainability. Where this has happened, we’re flagging the potential future volatility with our clients but we do recognise that the pressure you’re all under to achieve savings means these rates can be just too attractive.

Market capacity has remained steady in some areas but we have seen challenges, especially around property placements within the higher education sector. This has driven premium increases for some clients.

We had hoped that the worst was behind us, although the current economic situation may dictate otherwise and there is plenty of uncertainty ahead. Challenges remain in the following areas:

  • Rebuilding costs/inflation – some insurers are talking about this running between 17% and 20% for 2023.
  • Claims inflation on property and motor – this is gathering pace and linked to general inflation and supply chain issues.
  • Overall book performance – insurers are keeping a close eye on performance and are making corrections where this is of concern.
  • Global events, especially the war in Ukraine.
  • Cost of living – this is affecting us all, but public sector organisations are at the sharp end.

Detail is king. Insurers are asking for more detail than ever before both at tender AND at renewal. You need to engage with your internal teams to prepare and provide as much information and detail as possible. Incomplete renewal information and poor tender data may lead to disproportionate increases and in some instances, no cover.

It’s also essential to start early. If renewal terms are unacceptable, there is more time for alternatives to be sought, where possible.

This is our update from the different areas of the market:


There are two key concerns – claims inflation due to the cost of labour and materials and accurate up to date exposure information. Many clients have fallen behind with periodic valuation exercises and some insurers are imposing restrictions in cover where this is the case.

Sums insured need to be good for the lifetime of a policy – and with inflation currently running at 9.8% (August 2022) and predicted to get higher later in the year, this means that higher annual uplifts are required for sums insured to keep pace.

Cladding is still a concern. Insurers expect very detailed information for any property with cladding. Where cladding is being remediated, information is required by insurers throughout the process to ensure that any short-term deterioration in risk is reflected, and once complete, your terms are adjusted where appropriate.

Some clients are undertaking large capital projects and it will be interesting to see whether these are tapered as the cost of living crisis deepens. Construction projects need careful consideration and specialist covers, such as delay in start up, which can only be arranged as part of a standalone policy, may be more important than ever.

Cover has also increased in cost, capacity has reduced and insurers are less keen to offer extensions in periods. In extreme cases, this may either be very expensive or simply not available.


Increases are still being sought. These are claims driven but cases running well can expect lower increases of 5% to 10%. Competition exists for most, other than blue light where claims costs are still causing concern.

There are concerns over claims inflation but the best prices are going to the best risks. Providing the right information can also help.

Claims costs are escalating due to increased labour and utility costs and supply chain issues/lack of parts. Customers should expect the repair process to be more lengthy and more challenging than in recent years.


The market is still affected by claims inflation but we are not seeing whole book increases as we have done over the past couple of years. Corrective action is targeted at cases which are not performing in accordance with underwriters’ expectations. This can often relate to run-off patterns rather than more recent claims trends due to the long tail nature of liability placements.

Financial Lines (OI, PI, D&O and Crime/FG)

Ongoing encouraging signs are appearing with increases much lower than last year and increased capacity for some risks. This is as a result of insurers changing appetite again and starting to re-enter markets they had previously walked away from.

However, it is still necessary to budget for increases. Starting the process as early as possible and providing detailed information will help, but you may still be faced with clarification questions and terms provided late. Extensions are not always offered and we’ve also seen terms shifted from ‘any one claim’ to ‘in the aggregate’. This is a lower basis of cover and can affect any contracts you hold which require you to hold specific cover limits. Please also note that this will also be affecting your contractors and you should regularly check their insurance cover to ensure you remain adequately protected.

Sanctions checking has become more detailed with insurers asking for more information and having more rigorous internal processes. This is often taking weeks – and can cause frustrations when terms are delayed. Some insurers have additional sanctions questions which need to be answered – please pay due attention.

We also expect to see increases on officials indemnity rates as a result of some large procurement claims in the market.


The market is more cautious than ever about public sector risks. Access to cover is determined by the maturity of an organisation’s data risk management and the focus on improvements to risk standards remains.

Insurers are insisting on minimum cyber security requirements, which include multifactor authentication across the entire organisation; no end of life systems, unless segregated from main network, offline or behind a firewall; regular employee training; and system segmentation.

Many organisations are unable to achieve these requirements, and they’re increasing all the time. Clients who do have cover should expect large increases, often several multiples, and reduced limits.

It’s difficult to predict when this volatility will end: the cyber world is dynamic with risks increasing all the time. Our broking teams can provide creative solutions, including co-insurance and layered programmes, for the right risks but a flexible approach is needed from all parties. Incident response services are also becoming more popular – and we are always happy to chat about how we can help.

Building Safety Act

The Building Safety Act gained Royal Assent in April and some elements are now law. The aim of the act is to deliver improvements to building safety and bring in a new regulatory regime that will strengthen building safety and improve the performance of buildings and regulation of construction products.

The insurance sector welcomes any steps to improve risk management and safety, which should ultimately reduce the cost and frequency of claims. From an insurance perspective, the act proposes significant changes to the Defective Premises Act, including a 30 year retrospective limitation period for new builds and the inclusion of a new statutory offence of making existing dwellings unfit for human habitation.

While cover may be in place, current limitation periods are very unlikely to mirror the new legislation and there may be claims which are not insured.

There are areas which may create pressure on professional indemnity premiums and the financial lines market is already very stretched and has seen significant rating increases over the past couple of years. Many of these costs will initially be born within the construction industry, however these are likely to be passed on through the supply chain to other organisations, including local authorities.

Student wellbeing

In the higher education sector, we are closely monitoring the impact of the recent judgement in the Natasha Abrahart case (Abrahart v University of Bristol). Although the judge determined that there existed no general duty of care between the university and its student, they nevertheless did rule that the university was in breach of disability discrimination for failing to make reasonable adjustments to the manner in which it treated Natasha once it was aware, or should have been made aware, of her mental health disability.

With a growing number of self-harm and other wellbeing issues occurring within the higher education sector, it is essential that universities have an effective student wellbeing infrastructure in place. Ideally, staff should be trained to be able to identify the warning signs and understand how support students who may need to access help.


Long COVID remains an issue, with an estimated 1.8 million people in the UK experiencing symptoms according to Office for National Statistics figures (4 August 2022 release). Of these, 1.3 million people said their symptoms adversely affected their day-to-day activities, with 369,000 saying they were limited a lot.

An employment tribunal – Mr T Burke v Turning Point Scotland – sets out how Long COVID may be treated. In the case, Terence Burke, who had worked as a caretaker, claimed he was unfairly dismissed and discriminated against because of the protected characteristics of disability and age. He had been unable to work after Long COVID left him with symptoms including severe headaches and fatigue. The tribunal ruled in his favour, stating that he was a disabled person within the Equality Act 2010. This could have implications for employers’ liability claims, especially given the number of people affected by Long COVID.

Ukraine and the risk landscape

Aon, in collaboration with Lloyd’s, has published a report, Ukraine: A conflict that changed the world, to provide insights on the short, medium and long-term impacts on the global risk landscape.

Based on in-depth interviews with 75 sector experts and practitioners across Aon and Lloyd’s, the report explores five possible scenarios and the potential effects and challenges across seven areas – cyber, supply chains, food security, climate transition, energy security, ESG and public sentiment.

The report provides real-life, practical insights and examples of how organisations are adjusting their risk management approaches in response to the crisis. It also emphasises the need for insurance, as a key risk transfer mechanism, to help organisations mitigate these risks and build resilience.

A copy of the report can be downloaded from our website.

More information

To discuss any of the issues raised in this market update, please contact your Aon account manager or email Alison Goodwin at [email protected]