Natalia Char
Head of Commercial Risk Solutions, Latin America
“
The Q2 market remained cautious on Property, with increased pricing and more restrictive terms and conditions. Directors & Officers was volatile but substantial decreases could be achieved on well-performing risks. Cyber underwriters maintained stringent requirements related to controls, safety and remediation measures; however, appetite expanded as insurer interest in taking advantage of the high Rate on Lines continued. Client caution remained elevated in anticipation of potential impacts from the upcoming treaty renewal season.
Regional Overview
- The market remained generally stable, with challenges continuing on volatile and poor-performing risk types while in-appetite and well-performing risk types experienced more favorable market conditions.
- Conservatism increased as the June 30th reinsurance renewals approached, given the capacity constraints and tightening of terms and conditions that had resulted from the January 1st Reinsurance renewal season – especially on Natural Catastrophe-exposed Property risks and other challenging risk types.
- The Political Risk environment remained moderate in Q2; however, insurers were conservative and monitored this space carefully for potential volatility.
- Insurers were selective, especially related to high-hazard industries. Underwriters remained focused on risk quality and risk controls, and ESG was prevalent in underwriting discussions, with underwriters actively questioning clients’ governance and policies.
Q2 Market Dynamics
Pricing (+1-10%)
The effects of the January 1st treaty renewal season became more pronounced in Q2, especially for Natural Catastrophe-exposed risks, while Casualty renewals experienced flat to modest increases and the Auto market continued to experience the impacts of inflation and supply chain challenges. Cyber pricing moderated, with some price decreases. D&O pricing continued to decrease in pockets.
Capacity (Ample) While capacity remained generally sufficient, it was limited in some cases based on territory and type of coverage, with Property – especially, Natural Catastrophe-exposed risks – as well as certain industry types facing notable constraints.
Underwriting (Prudent) The underwriting environment remained disciplined, with an emphasis on loss history, risk quality, and risk controls, especially for Cyber risks. Securities such as MFA and encryption have been broadly mandated. Property underwriters kept quotes open for shorter periods of time which forced quick decision-making by clients.
Limits (Flat) Most risks renewed with flat limits. In some cases – especially, Natural Catastrophe Property and Cyber Ransomware – to achieve full tower limits, participation was spread across more layers / insurers.
Deductibles (Flat) Expiring deductibles were achieved in most cases. With competition, Cyber coinsurance could often be eliminated.
Coverages (Stable) Coverages remained generally stable, with continued restrictions on Ransomware and Political Violence, and increasing mandates around Strikes Riots and Civil Commotion.
Q2 Product Summary
Automobile (Moderate)
Market conditions remained moderate. Most renewals experienced price increases, driven by inflation, rising car values, and poor loss ratios but appetite was healthy for well-performing risks and capacity was abundant for most risks, with the exceptions of non-preferred, high-exposed or poor performing risks. Underwriting remained conservative.
Casualty / Liability (Moderate) Market conditions remained generally stable across pricing as well as terms and conditions. Capacity was available for the SME and corporate segments and insurer risk appetite remained healthy. High-hazard risks and those in the chemicals, agribusiness and energy industries – especially those with poor performance – experienced more stringent underwriting, tighter capacity and higher pricing.
Cyber (Soft) New capacity entered the market at competitive rates, especially in the excess layers, which served to drive down incumbent pricing, leading to some discounting. At the same time, underwriting remained stringent and rigid and risk controls were scrutinized.
Directors & Officers (Soft) Capacity from new excess and reinsurance markets drove increased competition and substantial decreases could be achieved on well-performing risks. Appetite was healthy as underwriters sought retention and growth amidst an expanding market.
Marine (Moderate)
Cargo market conditions remained favorable as a result of strong performance and adherence to stringent loss control practices. Exposures grew due to inflation, yet pricing remained generally flat. The Hull & Machinery market experienced more challenging conditions, but capacity was stable. Underwriting rigor strengthened and insurers requested detailed information, especially on poor performing risks. The Ports & Terminals market was moderate. Capacity remained stable and co-insurance was prevalent. Underwriting remained conservative for critical risks such as gas and chemical cargo.
Professional Indemnity (Moderate)
Pricing for most Professional Indemnity lines remained moderate. Medical Malpractice market conditions varied widely based on loss history and retentions, and few insurers had an appetite for new business. Architects & Engineers remained challenging, with limited appetite and very few insurers deploying capacity in Latin America.
Property (Challenging) The market remained volatile and challenging as insurers continued to respond to the impacts of the January 1st treaty renewals and anxiously awaited the June 30th reinsurance renewals. Rate increases were common, especially for Natural Catastrophe-exposed risks and risks that had not experienced recent adjustments. Strikes Riots and Civil Commotion mandates increased in most countries. Insurers kept quotes open for shorter periods of time which forced quick decision-making by clients.
©2023 Aon plc. All rights reserved | Contact Us | Privacy Policy | Legal