Marine

Cargo

Conditions were moderate across the Cargo market, characterized by sufficient capacity and moderate price increases, partly driven by increased reinsurance costs. Risk types such as autos, retail store exposures, food/beverage and pharma/life science experienced a challenging market environment, especially related to temperature sensitivities and shelf-life concerns. Following poor performance of heavy CAT exposed Stock Throughput risks, and as a result of rising reinsurance costs, such risks experienced significant price escalation. Stock limits increased over the past two years as supply chain issues forced increases in available stock-on-hand. Seeking more balance, Cargo insurers in Q1 reviewed their international cargo exposures relative to the amount of stock and some declined “stock-heavy” risks. Large domestic inland transit exposures were no longer enough for Cargo insurers to quote a predominantly static exposure program (the London market was an exception but insurers sought appropriate premium levels). Seeking premium relief, some Property clients explored moving inventory exposures into the Cargo market, with benefits most likely for risks where stock/inventory is a significant portion of overall TIV. Most excess stock capacity was sourced from London markets. Insurers remained concerned with supply chain disruption and aggregated cargo values at ports and interchange points. Spoilage losses were a major concern. Losses continued for ships losing containers overboard as well as fires on board container ships / RoRo vessels. Most insurers imposed full exclusions for shipments to/from/via Russia, Ukraine and Belarus and the 5 Powers Exclusions were added to cargo programs.

Hull & Liability

Hull & Liability rate increases moderated compared to the last three renewal cycles. Clean Hull risks renewed between flat and modestly upward, clean Primary Liability renewals trended modestly upward, and clean Excess Liability placements renewed with generally modest increases reaching the low single digits. (Presuming “as is” renewal exposures.) Social inflation continued to be a major factor for US Marine Liability placements when underwriters evaluated rating adequacy. The market saw some new entrants, along with a number of underwriters looking to grow their current portfolios, which increased competition in the market. Coverages remained constant with no new market-wide exclusionary wording being introduced. Deductible levels remained as-is barring poor loss experience where alternate deductible levels were sought to bring the account back to a profitable level and/or mitigate premium increases.

Logistics

The Logistics market continued to show positive signs of a potential improvement. Capacity stabilized. Pricing hovered around flat, with reductions achievable on well-performing, growing risks and increases – some significant – on poor-performing risks. Most logistics service providers who did not increase their limits in recent years sought limit increases. Virus, bacteria, and fungi exclusions continued to be required, and some insurers were more stringent in their restriction of geographic territories, excluding coverage for all perils, not just War and SR&CC, for shipments to/from and within Russia, Ukraine and Belarus. Some insurers, however, were willing to quote ‘on application’ and negotiate on a case-by-case basis. Supply chain issues and expanded operational scopes (e.g., final mile, white glove, and manufacturing) created a growing need for innovative solutions and additional capacity.

The Shipper’s Interest (SI) market pricing hovered around flat, with some reductions for well-performing risks. Capacity was sufficient. Concerns related to the availability of satisfactory third party administers continued to be a concern as shipper’s interest claims can have a high frequency and require speed of payment. The Logistics Errors & Omissions market was challenging with regard to international customs brokerage operations. Standalone Warehouse Legal Liability coverage started to improve, with modest price increases being the norm. A new Aon Excess facility has helped to create some much-needed competition in the Excess Logistics Liability market.

Looking ahead, current market conditions are expected to continue. Impacts of the events in Eastern Europe, supply chain challenges, and social inflation will continue to factor into underwriting discussions and placement outcomes.

Professional Indemnity

The market remained generally stable, characterized by modest rate increases, sufficient capacity, and very little pressure on retention levels. More specifically, Lawyers Professional Liability (LPL) pricing decelerated, with flat to modest increases for most risks and capacity was stable. Accountants Professional Liability (APL) experienced stable conditions, except for regional and national firms which saw single digit increases. Significant claim activity drove capacity downward and pressured retentions upward for firms in this segment. Pricing for consulting firms saw more significant increases, although higher Excess capacity gradually increased during the quarter. The recent failures of FTX and Silicon Valley Bank have begun to impact underwriting. Concerns emanating from these two events and general economic uncertainty have underwriters asking more questions but not yet taking noticeable action on a broad basis. Claim notifications remain significantly lower than historical norms but increasing severity remains an issue. Claims related to digital assets and SPAC's remain a serious concern for underwriters despite limited reported matters to date. Underwriter focus on exposure to sanctions persists, especially in the London market, but only a few insurers have added language to address the potential exposure. Looking ahead, underwriting is likely to be more rigorous as the impact of the FTX and SVB failures evolve and economic uncertainty persists; however, market trends are expected to continue in a similar direction in the short-term. Rate change in the LPL market is expected to continue to decelerate, with price decreases becoming more frequent, especially for firms with less than 100 attorneys. APL rates are expected to trend upward, including for very large firms who have not been experiencing rate increases. Pricing and available capacity in segments of the high Excess market could begin to be more challenged as insurers assess the potential of catastrophic claims from deteriorating conditions in the financial markets and overall economy.

Property

Market conditions deteriorated, stemming from myriad factors:

1. Unsatisfactory portfolio performance: Six years of underwhelming returns amidst above average catastrophe losses (capped by Hurricane Ian) together with losses from secondary perils such as wildfires, convective storms, floods and hail.
2. Investment losses: 40-year record inflation together with rising interest rates has led to investment losses.
3. Difficult treaty renewals: The reinsurance market faced its most challenging January 1 renewal period in a generation as the market experienced a fundamental shift in pricing, capacity and risk appetite, especially for catastrophe risk. A double-digit decline in global reinsurer capital was estimated.

While competition continued for risks in desirable occupancy classes, nominal catastrophe exposure and profitable historic loss ratios, rate increases were none-the-less experienced for such risks. Risks with Natural Catastrophe / Florida exposures, poor loss experience, and/or in challenging occupancies such as frame habitational, food, industrial and warehousing experienced challenging conditions including significant rate increases sometimes exceeding 50%. Capacity for Florida Windstorm, Severe Convective Storm and Wildfire was constrained, and targeted Natural Catastrophe limits were often difficult to achieve (and expensive). Underwriters continued to scrutinize reporting of insurable values, with many insurers applying margin clauses or coinsurance penalties when valuations were deemed inaccurate or underreported. Underwriting was less responsive and timely than the market at large, creating additional stress in an already challenged Property market. Terrorism market conditions remained firm as the events in Eastern Europe continued. Looking ahead, current market conditions are expected to continue. In their recently released North American hurricane forecast, Tropical Storm Risk anticipated below-norm activity for 2023, projecting two intense hurricanes, six hurricanes and twelve named hurricanes. Their initial forecast is for weak El Niño conditions to develop through August-September.