London, 1 October 2004 – Under Law Society regulations all law firms in England and Wales are required to renew their professional indemnity insurance by 1^st October 2004. Aon Professional Risks (APR) - Aon’s professional indemnity business - offers the following observations on how solicitors have been affected this year:

• Competition in the market has been fierce for the primary £1m layer of cover as a result of new insurer entrants and an increased appetite among existing Qualifying Insurers. While individual firms will have been affected according to their risk profile, it is likely that the overall premium pot for the compulsory limit will reduce by around 10% on last year, after discounting for the 13-month premium in 2003 i.e. the premium pot is likely to be in the region of £215 million.
• Despite significant premium rate rises in recent years – in some cases a doubling/tripling of costs - top-up cover (cover above the compulsory first £1 million) is beginning to stabilise with rates falling or remaining level with last year.  This is bringing the market in line with developments in other sectors throughout 2004, where it has already shown signs of softening.
• The buying patterns of most firms have remained constant in terms of limits and excesses, although at the larger end of the profession there has been an increased appetite for greater risk retention. Excesses for smaller firms have remained stable and nil excesses are still available.
• Conversion to LLP status  (Limited Liability Partnerships), which has been increasing, has made little difference to the limits purchased.  At the upper end, limits of £200 million are still commonly sought and capacity at this level and higher is available. 
• Firms accessing the US market for higher limits have seen some reduction in sterling capacity due to the impact of adverse exchange rate on dollars.  This has not caused any significant problem this year for the larger law firms. 
• There is a greater willingness on the part of underwriters to offer longer term insurance deals to the larger law firms.  If the market continues to soften over the next 12 months, there is likely to be more activity in this respect next year.  
• The change of renewal date this year has had relatively little impact, although for those firms accessing the US market for capacity it has meant competing with US schemes that also renew on 1 October.  
• The number of firms in the Assigned Risks Pool has traditionally been low – given this year’s renewal environment, this is unlikely to change.

Elizabeth Mullins, Executive Director at Aon Professional Risks, said: “After significant increases over the last couple of years for professional indemnity insurance, the profession overall is now seeing a levelling out of rates. The market has reached its peak and is entering its softer cycle.”

“The fact that this is good news must be tempered with an acknowledgement that overall it is in the profession’s interests for sustainable rating to apply.   The issue for the next three years and beyond will be the extent to which claims experience begins to outrun the premium income received. If this happens, pricing and availability will be affected.   In order to maintain long-term stability, firms need to prioritise risk management and insurers must opt for quality above volume.”

“Firms should be looking to control their claims records and taking positive steps to introduce or maintain a culture of risk management.” 

“While the move of the renewal date has made little difference other than to ease some of the problems of holidays, ultimately it remains in the best interests of the profession for more than one renewal date to be introduced.”

Notes to Editors

About Aon
Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company employs approximately 52,000 professionals in its 600 offices in more than 120 countries.  Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

About Aon Professional Risks
Aon Professional Risks provides strategic risk management advice and a broad range of innovative insurance products to professionals and the financial services sector, helping clients to find the most effective solution for limiting their risk in an increasingly challenging business environment. Aon Professional Risks provides dedicated facilities for smaller practices and sole practitioners as well as bespoke servicing teams for global organisations. The business is headquartered in London with expertise around the globe. 

Aon Professional Risks not only provides broking expertise and client servicing at its core but also offers a suite of specialist services under the same roof: this capability is unrivalled in the industry.   These specialist services include actuarial and consulting support from bankers, lawyers, engineers and other professionals; a third party claims vehicle which handles professional indemnity claims from first advice through to settlement; high quality market intelligence through a dedicated research unit; and a Transactional Liability team that can maximise value or overcome impediments during corporate transactions.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results, depending on a variety of factors.  Potential factors that could impact results include the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, resolution of regulatory issues, including those related to compensation arrangements with underwriters, pension funding, ultimate paid claims may be different from actuarial estimates and actuarial estimates may change over time, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs of resolution of contingent liabilities and other loss contingencies, and the heightened level of potential errors and omissions liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer reserves are under pressure.  Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.

Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.