Q2 Automobile Summary
Overall (Challenging)
Challenging market conditions continued, driven by a shortage of parts, the overvaluation of used cars, and inflation - all of which have converged to materially squeeze insurer profitability.
Pricing (+11-30%)
While well-performing risks experienced rate increases in line with inflation or slightly higher, poor-performing risks experienced more significant rate increases.
Capacity (Abundant) Capacity remained abundant in Brazil, with the key exception of risks in the transportation and logistics segment.
Underwriting (Rigorous) Underwriting results fell below expectations, leading to increased conservatism. While preferred risks may have experienced some flexibility, most experienced a rigorous underwriting environment.
Limits (Flat) Expiring limits were achieved in most cases.
Deductibles (Increased) Deductibles have increased in line with inflation.
Coverages (Stable) In most cases, expiring coverages could be achieved.
A Look Ahead (Challenging) As insurers seek to improve profitability, market conditions are expected to become more challenging.
Q2 Cyber Summary
Overall (Challenging)
Demand for Cyber insurance continued to rise but insurer capacity decreased considerably as insurers continued to assess the changing risk landscape relative to their product offerings. With a limited number of insurers in this space, negotiations have been challenging.
Pricing (+11-30%)
Rate increases decelerated in Q2 from the previous quarter.
Capacity (Constrained) Capacity remained constrained as insurers remained cautious in their capacity deployment, looking carefully at systemic risk.
Underwriting (Rigorous) Underwriting stringency and rigor remained strong, with detailed supplemental questionnaires required. Coverage was offered on a limited basis or, in some cases, denied, for insureds not demonstrating proper controls such as Multi-Factor Authentication, Backups, Incident Response Plans and Disaster Recovery Plans.
Limits (Flat) Expiring limits were achieved in most cases. Many insureds requested higher limits; however, they were difficult to achieve, often due to capacity restrictions, even if strong controls were evidenced.
Deductibles (Increased) Deductibles increased, driven largely by central underwriting mandates, rising loss costs, local currency devaluation and inflationary trends.
Coverages (Stable) Coverages have stabilized following previous adjustments to Business Interruption and Ransomware coverages. Vendor relationships have become a topic of discussion, but coverage terms were not generally amended.
A Look Ahead (Challenging) The Cyber market is expected to remain challenging; however, continued rate increase deceleration is expected as insurers ultimately gain confidence in this product.
Q2 Property Summary
Overall (Moderate)
Market conditions have continued to vary depending on client industry, claim records, exposure type, local underwriting authority and, most importantly, risk management maturity. 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. Preferred risks saw more moderate underwriting and plentiful capacity.
Pricing (+11-30%)
Rates climbed in Q2. Some local insurers changed their pricing guidelines, and some experienced a challenging treaty renewal which impacted their acceptance and pricing, even for renewals. High hazard and/or complex risks were more impacted due to the availability of lower local capacity, as well as global insurer guidelines and reinsurance pressure.
Capacity (Constrained) No additional capacity entered the local market in the last quarter. Although insurers and reinsurers had the same amount of available capacity, they were highly cautious in deploying it, and as a result, capacity was constrained especially for complex and high hazard risks. Consequently, coinsurance and reinsurance remained necessary, with more players cooperating in order to have full capacity for the highest limit policies.
Underwriting (Prudent) Local underwriters were cautious and stringent, requiring extensive information and risk management improvements. Recent survey reports for complex and high hazard risks remained mandatory.
Limits (Flat) Expiring limits could be achieved in most cases.
Deductibles (Flat) Expiring deductibles could be achieved in most cases; however, poor-performing risks experienced mandatory increases aimed at controlling insurer exposure. High hazard and complex risks were also subject to global guidelines, which in some cases required deductible increases.
Coverages (Stable) While coverage has been stable overall, negotiations have become more challenging related to Strikes, Riots and Civil Commotion, Contingent Business Interruption and Natural Catastrophe coverages as a result of poor loss experience in these areas.
A Look Ahead (Moderate) Current market conditions are expected to continue. Robust, detailed underwriting information will be a key risk differentiator, serving to elevate underwriter confidence and achieve better placement results. Starting the placement process early will continue to be essential. Changes to insurer guidelines and changes driven by renewal treaties will continue to create challenges for some risks.
Q2 Casualty/Liability Summary
Overall (Moderate)
While market conditions generally remained moderate in Q2, challenging conditions were experienced by higher-risk industries and poor-performing risks.
Pricing (+11-30%)
Insurers remained focused on returning to profitability and imposed rate increases accordingly. Rate increases varied depending on industry, loss history and the need for facultative reinsurance. The most challenging conditions were experienced by industries such as warehousing, transportation, manufacturing, construction, mining, energy, highways and chemicals.
Capacity (Abundant) Capacity was abundant in Q2, although insurers continued to limit their exposure in poor-performing industries.
Underwriting (Prudent) Underwriters generally demonstrated a disciplined approach while more rigor was applied for Product Liability, Product Recall and Employers Liability (when included as an additional Liability coverage).
Limits (Flat) Expiring limits could be achieved in most cases.
Deductibles (Increased) Deductible increases remained common in Q2, as insureds sought to manage premium costs.
Coverages (Stable) Coverage terms have generally remained stable; however, restrictions were imposed in some cases for Product Recall and Product Liability related to automotive, raw material, chemicals, pharmaceuticals, and food and beverage risks.
A Look Ahead (Moderate) Current market conditions are broadly expected to continue, with detailed underwriting information becoming even more important.
Q2 Directors and Officers Summary
Overall (Challenging)
The Brazilian Financial Lines market experienced polarized conditions in Q2. On one hand, the market has been challenging for: (1) US listed companies (ADRs and direct-listed); (2) activities related to mining, oil and gas; (3) financial institutions; (4) companies in financial distress; and 5) companies with activities related to the digital economy. These risks have faced constrained capacity and deductible increases, and have needed creative solutions including sharing arrangements and international reinsurance capacity. On the other hand, the market has been favorable for preferred risk types, including commercial companies (private or listed, without US securities exposure) with good financial structure, considering all levels of assets and revenues. These risks have experienced flexible terms and conditions, favorable pricing and modest deductibles.
Pricing (+1-10%)
While in many cases, expiring rates were achieved, the aforementioned ‘high hazard’ risks experienced modest increases. Risks that experienced a recent significant claim faced more significant increases.
Capacity (Ample) Capacity was generally sufficient in Q2, as some insurers that had reduced or withdrawn their capacity in recent years expanded it again, and new international reinsurers entered this space.
Underwriting (Prudent) As a result of the hard market of recent years and the economic impacts of the pandemic, underwriting caution remained strong. Underwriters required quality information, including additional details. Referral underwriting remained common, and response times were often slower. Favorable terms and conditions were reserved for well-managed risks. Appetite remained limited for global programs with master policies based in Brazil, and the market is limited.
Limits (Flat) Expiring limits were generally achieved in Q2. While some insureds explored limit increases, current pricing levels were deemed too expensive.
Deductibles (Flat) Expiring deductibles were generally achieved in Q2; however, increases were required for placements with recent significant claims.
Coverages (Flat) Expiring terms and conditions were generally achieved; however, restrictions and/or sub-limits were imposed on placements with recent significant claims.
A Look Ahead (Moderate) Although Brazil’s upcoming elections, geopolitical events in Eastern Europe and the global economic environment heighten insurer uncertainty, the market is expected to continue to soften from the challenging conditions seen in recent years. Local insurers are already showing a broader risk appetite, and intend to use digital distribution structures to enhance efficiency. International reinsurance trends are similar; more insurers are offering capacity to facultative operations (which also promotes better terms and conditions for local reinsurance contracts). As a result, in general, a market improvement is expected. However, insurers are expected to remain prudent with regard to high hazard risks, and will likely retain their current practices in pricing, deductibles, and terms and conditions.
Q2 Trade Credit Summary
Overall (Challenging)
Uncertainty surrounding the geopolitical events in Eastern Europe and upcoming elections remained high, leading to ongoing conservatism in underwriting, capacity deployment and coverage terms. Market conditions have become more challenging; however, competition remains strong which has served to keep price increases modest.
Pricing (+1-10%)
Rates increased slightly in Q2, driven largely by the upcoming local election, increased commodities costs and global inflation.
Capacity (Constrained) Capacity contracted and was constrained, especially in the agribusiness, retail and mining sectors.
Underwriting (Prudent) Underwriting was cautious in the context of uncertainty related to the geopolitical events in Eastern Europe and upcoming elections.
Limits (Flat) Limits remained generally flat, with the exception of some industries such as agribusiness and mining that required increases due to rising commodity prices.
Deductibles (Flat) Expiring deductibles were achieved in most cases.
Coverages (More Restrictive) While coverage terms generally remained stable, there was a notable contraction of coverage related to the geopolitical events in Eastern Europe.
A Look Ahead (Challenging) Uncertainty surrounding the geopolitical events in Eastern Europe and the upcoming elections is expected to continue, which will likely lead to ongoing underwriting conservatism and capacity deployment.
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