Geography Trends Q2 Asia Pacific


Market Dynamics

Q2 Automobile Summary

Overall (Moderate)

Market conditions became slightly more challenging in Q2. While well-performing risks experienced healthy competition, loss-impacted risks saw price increases in line with rising insurer claims costs.

Pricing (+1-10%)

Pre-COVID driving behaviors returned, elevating claims frequency. As a result, pricing increased, especially for loss-impacted risks.

Capacity (Abundant) Well-performing risks experienced an abundance of capacity.

Underwriting (Flexible) Flexible underwriting was leveraged by insurers as a differentiator for in-appetite risks while loss-active risks experienced a more conservative and rigorous underwriting environment.

Limits (Flat) Expiring limits were achieved in most cases.

Deductibles (Increased) Deductible increases were imposed, especially on loss-impacted risks.

Coverages (Stable) Expiring coverages were achieved in most cases.

A Look Ahead (Moderate) Inflationary pressures are expected to continue to impact loss costs. Replacement vehicles may become more difficult to source and the cost of shortages is expected to pressure policy benefit limits. Delays in car supply are also expected to affect the ability of insurers to service claims.

Q2 Cyber Summary

Overall (Challenging)

Market conditions remained challenging, with reduced capacity and coverage, and continued significant rate increases.

Pricing (>+30%)

Significant rate increases continued.

Capacity (Constrained) While capacity remained constrained, there has been little capacity reduction beyond that experienced in 2021.

Underwriting (Rigorous) Underwriting remained rigorous and there was minimal flexibility to deviate from established guidelines.

Limits (Decreased) Many organizations struggled to maintain existing limits at any premium cost and some selectively reduced limits to maintain budget spend, although this seemed to be plateauing.

Deductibles (Increased) Some sharp increases have been experienced over 2021 and H1 2022; however, this was experienced mostly by large corporates who were early adopters and had historically very competitive retentions.

Coverages (More Restrictive) Coverage remained restrictive in Q2. Some insurers made major corrections to coverage, but this was usually only for organizations deemed to have sub-par security levels. In some cases, insurers tentatively reduced specific coverage for organizations deemed to have sub-par security but were prepared to re-establish full coverage if the organization met security requirements.

A Look Ahead (Moderate) Insurers may cap total price increases. Capacity may increase and underwriters may become more flexible, which would help to stabilize the market, especially for risks with a strong security posture.

Q2 Employers Liability/Workers Compensation Summary

Overall (Challenging)

The Q2 renewal season saw consistent rate increases. In Western Australia, the largest of the privately underwritten markets, rate increases represented the largest annual movement in 11 years. Smaller jurisdictions experienced more modest market conditions, while labor hire companies experienced the most difficult market conditions. The Excess of Loss market was challenging following the withdrawal of a key insurer. Deductible increases were very significant, often mandated in addition to rate increases.

Pricing (+1-10%)

Portfolio-wide rate increases have continued.

Capacity (Constrained) Capacity was very constrained in the Excess of Loss market following the exit of a key insurer.

Underwriting (Rigorous) Insurers continued to take a very cautious approach to underwriting risks, particularly for new business. Poorly-performing programs often experienced very limited options.

Deductibles (Increased) Significant deductible increases were common, even in parallel with rate increases. Deductibles for Excess of Loss policies increased sharply, driven by claims inflation as well as an increasing amount of litigation.

Coverages (More Restrictive) Insurers looked for opportunities to reduce their exposure, scrutinizing overseas common law cover on Western Australian policies and COVID-19 exposure, as Australia re-opened international travel.

A Look Ahead (Challenging) Current market conditions are expected to continue.

Q2 Trade Credit Summary

Overall (Moderate)

Pricing decreased and insurer appetite strengthened. However, challenges in the construction sector continued to impact the market.

Pricing (Down)

The price reduction trend that started in late 2021 continued in H1 2022.

Capacity (Constrained) Capacity remained largely dependent on sector, with insurers still cautious on construction, fuel and retail while offering sufficient capacity for most risks in well-performing sectors.

Underwriting (Prudent) Insurers were flexible on commercial terms but cautious in relation to risk appetite. Risk acceptance in general returned to pre-pandemic levels but appetite in poorly-performing sectors such as construction and retail remained constrained in Q2.

Limits (Increased) Increases to policy limits were achieved as needed for preferred risks.

Deductibles (Flat) Expiring deductibles were achieved in most cases.

Coverages (Broader) Coverage extensions could be achieved for preferred risks.

A Look Ahead (Moderate) Contracts have seen margin erosion due to increases in commodity prices, labor shortages, supply chain delays and bad weather events on the East Coast, with some high-profile failures. A continuation of these trends may impact insurer appetite and capacity.

Q2 Casualty/Liability Summary

Overall (Challenging)

Market conditions remained challenging as social inflation continued to have a significant impact on prior year loss development. Insurers remained cautious and underwriting was prudent, with an ongoing focus on coverage adequacy and extensions. Insurer appetite and capacity remained strong for risks with a clean loss history.

Pricing (+11-30%)

Insurers continued to impose rate increases in Q2 and minimum pricing on Excess layers came under scrutiny. Risks that were running unprofitably continued to see sharp increases in pricing as insurers focused on recovering losses sustained over a number of years.

Capacity (Ample) Capacity remained sufficient in Q2. Insurers began to set minimum pricing limits irrespective of exposure as they assessed their cost of capital and appropriate rates of return.

Underwriting (Prudent) Underwriting was prudent, with underwriters focused on rate and coverage adequacy to try to stay ahead of loss curves and inflationary pressures. Certain insurers targeted middle market business, which was seen as less volatile, though the same loss trends were seen across all industry sectors and client sizes.

Limits (Flat) Despite premium increases, most placements renewed with flat limits as the cost savings were deemed to be insufficient relative to the additional risk.

Deductibles (Increased) Deductible increases were applied to trending loss areas. Minimum deductibles were applied to certain business sectors.

Coverages (More Restrictive) Coverage restrictions continued in Q2. Insurers reviewed wordings with a particular focus on Professional Indemnity, Pure Financial Loss and aviation exposures. Insurers also began to review their position in relation to cyber and data risks – restrictions were introduced but writebacks were considered by some insurers. Problem 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 and asked questions around indemnities and hold harmless clauses. Insurers reviewed coverage in respect to Communicable Diseases. Minimum underlying policy limits were reviewed with particular focus on US/Canadian Automobile and Workers Compensation.

A Look Ahead (Challenging) Market conditions are expected to remain challenging, with high claims inflation expected to cause significant deterioration within long-tail portfolios. Underwriters will remain prudent but perhaps be more accommodating toward long term clients who show exemplary loss records and risk management strategies.

Q2 Directors and Officers Summary

Overall (Moderate)

Market conditions continued to stabilize. While moderate discounts could be achieved for some risks, others such as coal risks, heavily COVID-impacted risks, or risks with governance or financial concerns continued to experience a challenging market environment.

Pricing (Flat)

Large pricing discrepancies continued between preferred and non-preferred risks, with flat renewals on average.

Capacity (Ample) Capacity remained sufficient, with incumbent insurers increasing capacity, driving healthy competition.

Underwriting (Flexible) Underwriting became more flexible in Q2 as insurers competed for new business.

Limits (Increased) Additional limits are generally available in the market.

Deductibles (Flat) Underwriters have reached deductible sufficiency given prior years’ adjustments. With the key exception of distressed risks, deductibles have renewed at expiring levels.

Coverages (Stable) Expiring coverages could be achieved in most cases. A key insurer issued a new, broader policy form and insurers were generally more agreeable to amendments in Q2.

A Look Ahead (Soft) Conditions are expected to further improve throughout the year as the market becomes increasingly competitive.

Q2 Property Summary

Overall (Moderate)

Insurer optimism has generally improved; however, it was somewhat tempered by the significant flood events of early 2022 which are expected to be the largest loss in Australia’s history. Appetite in Q2 strengthened as many insurers sought growth; however, conservatism remained in relation to catastrophe perils (particularly Flood/Storm), challenging occupancies such as Food and Beverage/EPS, Waste management/Recycling, Natural Catastrophe-exposed risks, and claims-impacted risks.

Pricing (+1-10%)

Following past adjustments, Q2 pricing was at or near technical levels, with only modest increases continuing. Placements with attritional claim records or those affected by recent flooding generally saw larger rate increases. Negotiations have proved effective in achieving reductions from originally quoted pricing.

Capacity (Ample) Capacity remained ample in Q2 with abundant capacity available for preferred risk types (Healthcare) and well-managed programs. Certain sectors such as Food and Beverage as well as Power, faced more challenging conditions and constrained capacity.

Underwriting (Prudent) Underwriting remained prudent, although greater competition in some areas led to increased flexibility. There was still a level of caution to ensure that the gains made in overall underwriting results over a number of years were maintained and built upon. In addition, internal scrutiny on underwriters and rigorous referral processes continued. Additional responsibility to qualify catastrophe exposure remained extremely important.

Limits (Flat) While there was still scrutiny on limits across policies, in general they are considered acceptable given the work that has been done over a number of years and therefore remained flat in Q2. The exception was for specific perils such as Flood, where limits are being imposed either specifically (location) or generally across policies/programs. The approach varies by insurer, with some taking the more specific approach and others taking more of a portfolio approach.

Deductibles (Flat) With the exception of Flood, deductibles generally remained flat. Some insureds continued to leverage increased deductibles to control premium costs but this has plateaued.

Coverages (Stable) Expiring coverages were achieved in most cases, with any changes largely based on specific circumstances such as loss history, or events such as recent weather events.

A Look Ahead (Moderate) Current market conditions are expected to continue, with some potential for improvement. Increased competition in certain sectors may drive improved pricing and coverage in the market. There will likely be a continued focus on Natural Catastrophe following flooding in early 2022. Insurers will seek to limit the impact of flood losses by limiting coverage and increasing deductibles.

China Market Dynamics

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