Global Financial Crisis a Key Driver in Market Conditions for Property, Casualty, and Directors' and Officers' Lines, Says Aon

Aon Corporation (NYSE: AOC), the leading global provider of risk management services, today released its U.S. Quarterly Market Overview for Property, Casualty, and Directors' and Officers' Lines. The inaugural report was generated by Aon Analytics to identify and address trends in risk and insurance and to provide clients with data to support informed decision-making in risk management.

"In this difficult economic climate, it has never been more critical to an organization's overall health and performance to have an effective risk management program in place," said Warren Mula, chairman of U.S. retail for Aon Risk Services. "With Aon's unmatched resources to deliver fact-based insights, such as those found in this report, we are best-positioned to help our clients better manage risks, overcome challenges and capture opportunities."

Lambros Lambrou, head of Aon Analytics, added: "Aon has taken a unique approach to maximize our market insights from the largest available source of proprietary broker data. The U.S. Quarterly Market Overview complements the firm's monthly reports in the ongoing effort to keep our clients abreast of ever-changing market and economic conditions as well as raise awareness of the practices of industry peers and competitors."

The U.S. Quarterly Market Overview is comprised of three main components - property, casualty and D&O. Highlights from each section follow:

    --  Property: Following a tumultuous 2008, the property market experienced
        mild hardening during the first half of 2009 due to the global financial
        crisis and previous heavy property losses from natural catastrophe
        events. Property schedules with little or no natural catastrophic
        exposures remain competitive. Insureds should expect renewed competition
        and modest downward pressure on rates into 2010.
    --  Casualty: The casualty market remains soft and competitive with low rate
        decreases resulting in lower premiums for many insureds. Primary
        automobile experienced an average increase of less than one percent in
        Q2 '09, the first increase in rate on any casualty line in several
        years. Soft market conditions are expected to continue into 2010.
        Carriers will be challenged to sustain growth in the coming years due to
        competition and decreasing margins.

    --  D&O: The economic turmoil has worked itself through the banks,
        insurance companies, investment management firms and hedge funds. In the
        financial institutions marketplace, rates are increasing significantly,
        capacity is shrinking and coverage terms are tightening. On the other
        hand, the market for all other sectors continues to be extremely
        competitive with rates trending down, ample capacity and the broadest
        terms and conditions seen in years. Exceptions seen in the commercial
        realm stem from industries rife with bankruptcies. Most insureds should
        expect to see continued stabilization of rates in the short term, while
        rates for financial institutions are expected to continue to increase.

A major dislocation of markets, radical reduction in capacity, terrorism event or natural catastrophe may affect the forecasts.

In addition to the above insight found in the U.S. Quarterly Market Overview, Aon's financial services group recently issued its Quarterly D&O Pricing Index, which delves deeply into the trends seen year over year for this essential line of coverage. The analysis finds that pricing increased 4.07 percent in the second quarter as compared with the second quarter of 2008. Current rates in the S&P Financials sector (banks, diversified financial, insurance and real estate) are up 14.77 percent while all other S&P sectors (service, manufacturing, technology, etc.) were flat, marking the first time in more than three years that rates did not decrease. D&O policies are typically written for a 12-month period; thus, this year-over-year comparison is a close approximation of renewal pricing and results.

"The delicate balance between the forces holding D&O prices down and the need for rate increases could soon shift in the favor of underwriters," said Michael D. Rice, II, national practice leader of Aon's financial services group. "Fortunately for Aon's clients, pricing in the D&O marketplace continues to remain at soft levels."

Methodology: Aon Analytics 2009 U.S. Q2 Quarterly Market Overview

This report on property, casualty, directors' and officers' lines is based on data from Aon proprietary databases such as the Aon Global Risk Insight Platform(SM). Results represent placement of commercial and large account information from thousands of U.S. companies. Aon GRIP(SM) is the world's leading global repository of global risk and insurance placement information and provides fact-based insights into Aon's global premium flow. Aon Analytics collected and tabulated the results, provided analysis and interpreted findings.