Hardening slower than expected

Clearly, Rates could not have gone any lower, yet many expected them to rise far higher and more quickly this year as the deepest recession for over 60 years was set to become the catalyst for a hard market. However, it has been a real struggle for insurers to gain meaningful rate increases: Aviva tried to lead the market towards the end of last year but was unable to gather enough momentum from other insurers to pull this through.

The lack of serious rate rises is happening for a host of reasons: insurers are still extremely reluctant to give up market share; some insurers still have plenty of capacity with some seeing this as a prime opportunity to grow; brokers are competing harder than ever to win business off each other, with many having pulled out of personal lines to concentrate solely on commercial business; and the recession is making client retention harder for brokers as clients shop around. There is evidence that rates have been increasing by around 5% in the last couple of months but this is only coming back from levels that were seen as unrealistic in the first place; any hardening is still taking place at the smaller end.

Many in the market are saying that only a major event will bring about a significant shift in pricing and a sustained hard market - although the floods of 2007 clearly did not. They are probably right but, unless the increases improve on what we have seen so far, some awful looking loss ratios could be on display come the end of the year.

Aon splashes the cash

In last month's comment, I wrote that marketing was set to become an increasingly important aspect of commercial insurance broking. Aon clearly had the same impression, as it has since announced an audacious sponsorship of Manchester United. Starting next year, reports suggest that the broker will spend an eye-watering £20m for four years of sponsorship. It is fair to say few other brokers can compete with that.