Automobile
Moderate market conditions continued in Q3. While price increases remained modest, the transition to Direct Compensation for Property Damage (DCPD) in some parts of the country led to pricing conservatism as subrogation of no-fault losses comes to an end. Insurers demonstrated healthy appetite and capacity was generally sufficient. However, high-risk exposures such as hauling hazardous goods/fuel, US-exposed risks and public passenger risks continued to experience capacity constraints. Underwriters continued to request detailed information on fleet safety controls. Looking ahead, a moderate market environment is expected to continue.
Casualty/Liability
Market conditions have generally stabilized with the key exceptions of higher-risk classes of business and poor performing risks. Price reductions were achieved on primary placements, especially when there was competition or where exposures increased, while excess layers experienced flat to moderate increases. US nuclear verdicts and social inflation were key areas of focus and determinants of pricing and capacity deployment. Additional capacity was available in some cases, but limits were carefully deployed. Underwriting authority remained limited and some insurers were short-staffed, leading to challenges supporting requested turnaround times. Pollution, wildfire, PFAS chemicals, and Eastern European related exposures remained in focus and were often excluded, carved back or sub-limited. Looking ahead, a focus on growth is expected to create competition, additional capacity, and a moderate rate environment.
Cyber
Market conditions improved measurably in Q3; however, a keen focus on minimum information and operational technology (IT/OT) security controls continued. New domestic and international capacity entered the market; for risks that met minimum standards, primary and excess capacity was broadly available while non-preferred risks – regardless of size – saw minimal insurer appetite and capacity. Price increases continued but moderated, most notably for larger risks. Looking ahead, market conditions are expected to continue to slowly improve for risks able to demonstrate strong IT/OT security controls. Coverage adjustments are expected for State sponsored cyber attacks and other widespread cyber events as the insurability of these events continues to be questioned.
Directors and Officers
The market transition further accelerated in Q3, especially for public companies and excess layers. Private companies experienced slight increases due primarily to inflation and rising legal costs. While underwriters remained prudent, they demonstrated increased flexibility. Capacity remained sufficient for most risks. Most insurers maintained their limit strategies, although some became more aggressive in offering increases. Looking ahead, the transition to a softer market environment is expected to continue as insurers focus on year-end growth targets.
Property
Despite recent adjustments to rates, deductibles and coverages, updated modelling resulted in continued adjustments in some cases. Market conditions were generally moderate; however, higher-hazard and natural catastrophe exposed risks continued to experience challenges. While capacity was generally sufficient, some insurers reduced their lines on subscriptions to a maximum of 20-25%, and higher hazard property placements required more subscribers to complete. Underwriters scrutinized contingent business interruption and required extensive details related to named supplier/customers. The focus on insuring to value increased and some underwriters mandated inflationary increases. Exposure value increases, combined with rate increases, led to material premium increases for some insureds. Looking ahead, some challenges may arise – especially for real estate, residential, and forestry – toward the end of the year as market capacity for natural catastrophe disappears.
Trade Credit
Losses increased as a result of inflation, the withdrawal of government support, and geopolitical tensions, although they generally remained within a range deemed acceptable and as a result, insurers remained focused on profitable growth. Credit limit requirements increased amidst uncertainty over supply chains and higher prices, even despite a decrease in commodities costs from their highs earlier in the year. Insurers were cautious in accommodating requests for increased credit limits and routinely requested updated financials on risks where transparency was deemed insufficient. Looking ahead, insurer appetite and underwriting approaches may shift if loss ratios continue to rise amidst slower economic growth and market volatility in challenging sectors.
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