Q1 Automobile Summary
Overall (Soft)
Insurers continued to benefit from low driving activity related to COVID restrictions, and many continued to seek growth in their Commercial and Heavy Motor portfolios.
Pricing (Flat)
Despite a 5% rise in claims costs, pricing remained flat for most risks, with the key exception of loss-active risks, which experienced rate increases.
Capacity (Ample) Market capacity remained sufficient; trade was strong and competitive.
Underwriting (Flexible) Insurers continued to demonstrate flexibility on well-performing risks, including offering Claims Experience Discounts and value-added services for little or no additional charge. Loss-active risks experienced more conservative and cautious underwriting approaches.
Limits (Flat) Limits were generally stable. Dangerous Goods Limits increases were available in some cases upon request.
Deductibles (Flat) Expiring deductibles were achieved in most cases; however, increases were imposed on some poor performing risks and risk types.
Coverages (Stable) Most risks renewed with expiring coverage terms; however, Claims Experience Discounts and other value-added services were available for well performing risks at little or no additional charge.
A Look Ahead (Moderate) As COVID-related restrictions ease, claims frequency is expected to increase. In addition, supply chain issues are expected to impact auto parts availability, increasing the cost of claims. As the prevalence of hybrid and electric vehicles increases, insurer portfolio profiles will change. Competition is expected to increase on well-performing risks.
Q1 Cyber Summary
Overall (Challenging)
Market conditions remained challenging, with significant price increases, constrained capacity, mandatory coverage restrictions, and rigorous and rigid underwriting.
Pricing (>+30%)
Significant market adjustments continued. Insurers have been transitioning to a minimum cost for capacity model, irrespective of risk controls or maturity.
Capacity (Constrained) Capacity remained constrained but signs of moderation emerged.
Underwriting (Rigorous) Underwriting criteria have been applied stringently. Underwriters seemed to have minimal flexibility to deviate.
Limits (Decreased) Limit reductions have continued to be imposed by insurers.
Deductibles (Increased) Deductibles have steadily migrated upwards for a significant majority of organizations.
Coverages (More Restrictive) Insurers have continued to restrict coverage in certain areas; however, signs of coverage stability have emerged.
A Look Ahead (Challenging) Market pricing is expected to align stringently to rating criteria. Replacing any lost capacity is expected to come at an increased cost. Underwriting rigor is expected to continue to strengthen.
Q1 Employers Liability/Workers Compensation Summary
Overall (Challenging)
Insurer appetite for new business has remained limited, with the exception of well-performing risks or those in sectors insurers have targeted for growth. The Excess of Loss market has remained particularly challenging.
Pricing (+1-10%)
Portfolio-wide rate increases have continued, with the key exception of insureds which have materially improved their claims performance.
Capacity (Constrained) Excess of Loss capacity has remained a significant issue for poor performing programs. Some insureds have materially increased their deductible in order to attract capacity to their program.
Underwriting (Prudent) Insurers have become more selective. This is a consequence of a limited imperative to write new business as well as insurer pricing teams influencing risk selection.
Deductibles (Increased) Material deductible increases have been imposed on Excess of Loss placements with claims activity.
Coverages (More Restrictive) Insurers have been reviewing their positions on overseas common law exposures, often leading to more restrictive coverage by way of reduced sub-limits and/or broader exclusionary language (e.g., removing cover for communicable diseases).
A Look Ahead (Challenging) Current market conditions are expected to continue.
Q1 Trade Credit Summary
Overall (Moderate)
Insurer risk appetite contracted sharply in reaction to COVID, but has improved, although insurers remained cautious on high-risk sectors, and capacity constraints remained a significant issue in Q1. Travel, leisure, tourism, retail and vertical construction remained amongst the most negatively impacted sectors.
Pricing (Down)
Across the market, renewal rates were up significantly in 2020 and into 2021. Late 2021 saw more favorable conditions, and in Q1 2022 insurer competition has led to rate reductions.
Capacity (Ample) Capacity remained largely dependent on sector, with insurers still cautious on travel, leisure, tourism, retail and construction while offering sufficient capacity for risks in well-performing sectors.
Underwriting (Prudent) Insurers have broadened their focus beyond minimizing losses to also seek top line growth, with a focus on well-performing business operating in lower risk sectors.
Limits (Increased) Increases to policy limits were achieved for risks in well-performing sectors.
Deductibles (Flat) Expiring deductibles were achieved in most cases.
Coverages (Broader) Insurers have been focused on the “knitting" of Whole Turnover policies but have become more interested in supporting non-standard structures.
A Look Ahead (Moderate) Large losses in some sectors will drive continued insurer conservatism.
Q1 Casualty/Liability Summary
Overall (Challenging)
Social inflation continued to have a significant effect on long-tail portfolios and claims inflation has added complexities with managing portfolios and historical losses. Despite these issues, insurer new business appetite and capacity remained strong for risks with a clean loss history, although price increases continued.
Pricing (+11-30%)
Insurers continued to impose rate increases while minimum pricing on excess layers was also under review, in line with cost of capital requirements. At their January 1st renewals, treaty rates increased as reinsurers implemented measures to remain ahead of loss costs and inflationary pressures. Some risks that were running unprofitably or were poorly rated experienced sharp increases in pricing, sometimes combined with higher deductibles, as insurers looked to recover losses sustained over a number of years.
Capacity (Ample) Insurers focused in Q1 on limit management strategies - in some cases, reducing deployed limits and requiring ventilation when layering. Additional capacity available via sidecar solutions such as Aon Client Treaty continued to provide strategic options and support. As a result, available capacity remained generally sufficient with the key exceptions of challenging risk types including sexual misconduct, frequency-exposed business, large worker-to-worker risk exposed business, mining, tailings, coal and bushfire exposure.
Underwriting (Rigorous) Insurers carefully analyzed unprofitable risks, as well as “soft market clauses”. Challenging areas continued to include sexual misconduct, bushfire liability, frequency exposed business, large worker-to-worker risk and mining, especially thermal coal and tailings dam exposures. Insurers also looked at contractual liability, asking questions around indemnities and hold harmless clauses. Risk management and mitigation measures remained an important discussion topic. Underwriting escalation has become common, and the referral process often takes significantly longer, especially where the decision process involves an overseas office.
Limits (Flat) Insureds conducted limit profiling exercises to reaffirm limit setting rationale (which had, in many cases, been decided in a soft market); however, most insureds did not actually reduce limits as the savings were deemed incommensurate with the additional risk.
Deductibles (Increased) Deductible increases were applied to trending loss areas. In addition, minimum deductibles were applied to certain business sectors such as in the retail space and worker-to-worker risk exposed businesses from which the majority of issues in the market have arisen.
Coverages (More Restrictive) Insurers reviewed wordings with a particular focus on non-traditional General Liability coverages such as Professional Indemnity, Pure Financial Loss, and Aviation risks. Insurers also reviewed their positions in relation to cyber and data risks and introduced restrictions. Some insurers offered limited buybacks. Sexual misconduct sub-limits were extremely challenged; this has been one of the toughest areas of the market due to historical losses as well as the associated 'moral hazard’. Insurers reviewed coverage with respect to Communicable Diseases, and applied exclusions to most risks, in line with treaty requirements. Minimum underlying policy limits were reviewed with a particular focus on United States and Canada Automobile and Workers Compensation.
A Look Ahead (Challenging) Insurers are expected to remain cautious as the recent APRA statistics are pointing to a net loss ratio of over 100% once again. Insurers will be highly focused on specific segments of risks, particularly those that are loss-leading or have historical claims from the 2011 - 2015 period that have reopened/are newly reported and which may be trending toward a poor profitability position. Well performing risks will continue to experience strong insurer appetite. Insureds must remain diligent in selecting insurers who will partner with them to achieve both short term and long term objectives.
Q1 Directors and Officers Summary
Overall (Moderate)
Market conditions continued to stabilize. Greater flexibility of appetite by underwriters has allowed for enhanced competition on risks and more favorable pricing.
Pricing (+1-10%)
Large pricing discrepancies continued, with significant increases prevalent amongst certain industries and distressed risks. More commonly; however, financially stable risks have attracted moderate price increases reflective of underwriters’ focus on retaining favorable business.
Capacity (Ample) As new capacity has entered the market, it has been sufficient for most risks and risk types; however, capacity has remained tight for non-preferred risks.
Underwriting (Prudent) Insurers focused less on portfolio underwriting requirements and more on risk selection and meeting the needs of each individual insured. Greater underwriting autonomy has been allowed at the local level.
Limits (Decreased) While expiring limits remained available, the purchasing habits for larger companies have changed as a result of the hard market. Some larger companies have purchased less limit to counter the rising cost of multiple years of premium increases. This has been especially so for Side C. Greater stability in limits has been seen for smaller and mid sized limit programs.
Deductibles (Flat) Underwriters have reached deductible sufficiency given prior years’ corrections. With the key exception of distressed risks, deductibles have renewed at expiring levels.
Coverages (Stable) Greater underwriting flexibility has allowed for more negotiation on coverage. Few additional exclusions were applied in Q1. Generally, expiring coverages were achieved as a minimum.
A Look Ahead (Moderate) The market continues to transition and should become increasingly competitive and buyer-friendly in the coming quarters – driven by enhanced insurer appetite. Several insurers are expected to update their policy forms during 2022.
Q1 Property Summary
Overall (Moderate)
Recent significant flood events in Queensland and New South Wales have prompted insurers to recalibrate their approaches and implement more aggressive underwriting and pricing.
Pricing (+11-30%)
Early indications on a portfolio level pointed to a moderate rate environment; however recent events have led insurers to revisit and adjust these indications.
Capacity (Ample) Capacity has remained available.
Underwriting (Prudent) Additional modelling exercises and information has been required by insurers in order to release terms, placing further time pressure on an already compressed underwriting process.
Limits (Flat) Expiring limits were achieved in most cases; however, flood limits are expected to come under pressure following recent flood events.
Deductibles (Flat) Expiring deductibles were achieved in most cases; however, flood deductibles are expected to come under pressure following recent flood events.
Coverages (Stable) Expiring coverages were achieved in most cases.
A Look Ahead (Moderate) As insurers quantify the cost of the flood events in the Northern part of the country, 2022 underwriting and pricing approaches will be further shaped.
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