RESILIENCE remains a fundamental enabler of business strategies in 2024, as many of the economic, geopolitical and humanitarian events that shaped 2023 will continue to evolve in 2024, and new trends will emerge, creating more challenges as well as opportunities, according to Alicia Goosen, head of commercial risk and chief broking officer at Aon South Africa.

Her comments came after Aon South Africa launched its 2024 Insurance State of the Market Report. The report aims to provide global and South African insurance market insights.

Goosen said challenging and unpredictable market conditions have refocused insurance buyers on the value, structure and overall cost of their insurance programme. The makeup of risk transfer is also evolving.

"In most cases, buyers will be faced with decisions around how to manage an ever-expanding and complex risk transfer need. It has never been more important to focus on Total Cost of Risk (TCOR) rather than risk transfer or premium cost.“The current market dynamics create unique opportunity, incredible uncertainty, and risk that is increasingly connected, and more severe. With this change comes a pressing need for businesses to make important decisions, more often.”

According to the report, major trends in the South African insurance market include:

• Securing sufficient insurance capacity from local and global insurers continued to be challenging, especially for global programmes and for risk types that were not preferred.

1. The requirement to provide granular information such as geo-co-ordinates and value splits between property damage and business interruption remained burdensome and challenging for clients.

• Inflation impacted underwriting and claims processes.

• Natural-catastrophe-related coverage restrictions/exclusions were applied to specific locations, for example, KwaZulu-Natal.

• Grid collapse exclusions (Eskom load shedding risks) were fully embedded in underwriter placement terms.

• Alternative Risk Transfer mechanisms, valuation services, and business interruption analysis have become more prevalent.

The report said the key trends to watch in 2024 include: 

• The continued threat posed by cyber risk as cyber attackers continue to exploit vulnerabilities and adapt their methods.

• Geopolitical and societal pressure to tackle climate change is mounting as energy transition efforts accelerate, requiring major investment.

• The demand for parametric covers will increase as confidence grows, providing a broader, more creative suite of risk management tools.

• Political, terrorism, and strike risks loom large in an election year, requiring specialist broking experience in both the local and international insurance markets to structure the best coverage possible.

According to Goosen, Aon works closely with organisations and businesses to identify the risks they are faced with in order to make better decisions when it comes to addressing traditional exposures and emerging risks.

“One of the key drivers of negotiating successful renewals is for clients to be proactive and differentiate their risk, with the current, selective underwriting environment calling for detailed disclosure and business profiles as well as a description of risk management and mitigation efforts.

“It has never been more important for clients to leverage analytical tools like risk modelling and here Aon works closely with the business to ensure that their risk differentiation is on point, and also ensure sufficient lead time for underwriters to review to get positive outcomes,” she said. 

Looking ahead, the report said: “We expect many of the economic, geopolitical, and humanitarian events that shaped 2023 to continue to evolve in 2024, and new trends to emerge, creating challenges as well as opportunities.“ Written by Dieketseng Maleke, IOL