Q2 Casualty/Liability Summary
While market conditions generally remained moderate in Q2, challenging conditions were experienced by higher-risk industries and poor-performing risks.
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 was abundant in Q2, although insurers continued to limit their exposure in poor-performing industries.
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).
Expiring limits could be achieved in most cases.
Deductible increases remained common in Q2, as insureds sought to manage premium costs.
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
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.
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 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.
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.
Expiring limits were generally achieved in Q2. While some insureds explored limit increases, current pricing levels were deemed too expensive.
Expiring deductibles were generally achieved in Q2; however, increases were required for placements with recent significant claims.
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
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.
Rates increased slightly in Q2, driven largely by the upcoming local election, increased commodities costs and global inflation.
Capacity contracted and was constrained, especially in the agribusiness, retail and mining sectors.
Underwriting was cautious in the context of uncertainty related to the geopolitical events in Eastern Europe and upcoming elections.
Limits remained generally flat, with the exception of some industries such as agribusiness and mining that required increases due to rising commodity prices.
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.