Automobile
Challenging market conditions persisted as inflation and rising parts costs continued to pressure insurer profitability. Poor performing risks and those with challenging exposures experienced the greatest impacts, including significant price increases and restricted capacity. Well performing and less complex risk types experienced more modest rate increases and sufficient capacity. Due to poor portfolio performance in 2022, insurers in Q1 focused on improving their performance, which led to more conservative underwriting, with flexibility demonstrated only on preferred risk types. Expiring coverages, limits and deductibles were achieved in most cases; however, some limitations were imposed for Logistics risks, Electric Vehicles, and on risks where a lack of parts and specialized labor had impacted claims costs. Looking ahead, insurers will continue to seek to improve performance. Detailed underwriting information will become even more important for achieving superior placement results.
Casualty/Liability
Insurers remained focused on a return to profitability, creating a moderate market environment; however, conditions varied widely based on industry, loss history and the need for facultative reinsurance. Industries such as warehousing, transportation, manufacturing, construction, mining, energy, highway, and chemicals experienced the most challenging environment, largely driven by the long-tail nature of losses. Smaller and less complex risks experienced more favorable market conditions. The underwriting environment remained disciplined, with greater rigor applied to Product Liability, Product Recall and Employers Liability as an additional coverage. Coverage terms remained stable; however, some contraction occurred for Product Recall and Product Liability for automotive, raw material, chemicals, pharmaceuticals and food and beverage risks. Looking ahead, current market conditions are expected to continue. Underwriting rigor is expected to strengthen, with detailed underwriting information required to secure superior outcomes.
Cyber
Despite signs of improved market performance, and a material increase in appetite and competition, the Q1 environment remained challenging. Price increases continued as insurers sought to recover from the losses of 2021 and 2022. Underwriting rigor remained strong; underwriters strictly adhered to stringent guidelines and required extensive, detailed risk information. Alternative limits were explored to help offset premium costs. Deductibles have stabilized following the adjustments made in recent years. Looking ahead, new capacity is expected to promote greater competition, which will likely lead to more moderate market, although significant price increases are expected to continue. Underwriting caution will remain elevated.
Directors and Officers
Market conditions continued to trend favorably. Appetite expanded and capacity increased across primary and excess layers – even for large and complex risks, providing more alternatives and a competitive pricing environment. Underwriting became generally more flexible. Key exceptions included Brazilian companies with US exposure (ADR or direct listed), companies involved in bankruptcy or judicial reorganization, or with governance / financial concerns, financial institutions, oil & gas companies, mining companies, and companies with operations or exposure in Eastern Europe , and companies with material claims history. These risks types continued to experience more challenging market conditions and conservative underwriting. Detailed, quality risk information remained critical to achieving underwriting flexibility and superior outcomes. Looking ahead, favorable market conditions are expected to continue but may be impacted by the important macro events, potentially leading to more conservative underwriting and pricing. An increase in Judicial Recovery has drawn insurer attention due to the potential impact on D&O policies and will impact underwriting as insurers seek more robust financial information from clients.
Marine
The Hull & Machinery market has remained stable for a prolonged period. Large fleets that require high limits leveraged the facultative reinsurance market, which tended to be more expensive and complex. Well performing risks experienced modest price increases while complex or poor performing risks experienced more significant increases. Capacity remained sufficient across the H&M market. Despite a rise in claims, pricing remained flat for most risks as insurers sought to retain their portfolios, although challenging risk types such as food (agribusiness), e-commerce and solar panels experienced more significant increases. The Marine Cargo market was more challenging due to a lack of infrastructure and investments as well as complexities in key segments such as electronics, pharmaceuticals, and food, which served to increase insurer underwriting scrutiny and elevate caution around capacity deployment and pricing. Lack of a local market for Protection & Indemnity risks drove all placements through reinsurers. Across all Marine products, underwriting was conservative, and extensive underwriting detail was required, especially where losses had been experienced; however, with robust information and when risk maturity was demonstrated, underwriting flexibility increased. Looking ahead, local P&I appetite is expected to expand and as a result, capacity is expected to increase. Detailed underwriting information and evidence of risk maturity will remain crucial for achieving successful placement outcomes. The political environment and related uncertainties is expected to create further market conservatism.
Professional Indemnity
Market conditions were stable overall, with ESG investments favorably impacting insurer risk perceptions and leading to superior placement results. While flat renewal pricing could be achieved in most cases, risks with poor loss history, material growth, or high susceptibility to litigation generally experienced price increases. The local market was narrow, with very few insurers, and capacity deployment remained stable: sufficient for architects and engineers, media and information technology risks, and tight for accountants, lawyers, notaries, financial institutions and insurance broker risks. Underwriting was flexible, but underwriters exercised heightened diligence and were more rigorous in their analysis, often seeking detailed information to better understand client activities and risks – especially, challenging risk types. Following mandatory increases in insured participation in losses in 2022, deductibles stabilized in Q1. Looking ahead, current market conditions are expected to continue.
Property
Market conditions continued to vary depending on client industry, claims record, exposure type, and risk management maturity, as well as insurer local underwriting authority. Conditions remained challenging for complex and high hazard risks including energy, heavy chemical, pulp & paper, and logistical warehouses, especially where high limits were required and local capacity was limited. Treaty renewal terms drove up pricing and tightened underwriting guidelines which narrowed insurer appetite and risk acceptance. In addition to treaty impacts, inflation drove widespread pricing reviews. Capacity remained stable; however, insurers were highly cautious in how they deployed it, resulting in capacity constraints as insurers sought to limit their exposure. Detailed underwriting information – including recent survey reports for high hazard risks – was mandated. Expiring deductibles were achieved in most cases; however, increases were mandated for poor performing risks. Underwriting discussions related to Strikes, Riots, & Civil Commotion, Contingent Business Interruption and Natural Catastrophe risks were challenging. Looking ahead, current market conditions are expected to continue. Robust, detailed underwriting information will become even more important to boost underwriter confidence and serve as a differentiator. Starting the placement process early will remain important.
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