Automobile
While modest price increases remained common, a competitive market continued during Q3, with healthy competition and appetite for well-performing risks. Insurers tended to initially propose more significant price increases but generally demonstrated a willingness to reduce them, especially for risks with robust risk management and higher deductible levels. Growth-focused insurers explored innovations to support evolving market needs. Looking ahead, current market conditions are expected to continue, even as claims inflation and climate impacts become more of a challenge for the market. Offsetting those factors will be insurer growth targets, which remain unmet for some insurers for 2022.
Casualty/Liability
Modest rate pressure continued as insurers remained prudent in managing their portfolios. Competition was healthy for smaller risks. Capacity remained stable; any reductions were offset by new, growth-focused entrants. Key insurer concerns were high inflation, claims costs, and US-exposed risk, as well as product and environmental exposures. Underwriters leveraged risk engineers to review complex exposures before providing coverage. Looking ahead, insurer competition is expected to remain healthy, especially for risks in the mid-market space with less complex exposures. Complex risks or those with a larger geographical footprint will likely experience a more challenging environment. Insurers may continue to increase the scope of products excluded to align with their ESG guidelines.
Cyber
Geopolitical events in Eastern Europe and systemic risk issues continued to create uncertainty, leading to rate increases and coverage restrictions; however, rate increases moderated from H1 2022 as many insurers regained control of their loss ratios and new capacity entered the market, primarily in the high excess layers. While market conditions became less severe for most risks, those whose Cyber risk posture was deemed inadequate faced a challenging environment and had very few options. Insurers leveraged inconsistent approaches to minimize their systemic risk exposure, creating complications when building towers. Looking ahead, new capacity continues to enter the market and is expected to have a moderating effect. Rather than broad mandates, insurers will differentiate organizations based on client segment, risk posture/controls, and loss trends. Insurers will continue to scrutinize the cover offered for critical infrastructure, systemic, correlated events.
Directors and Officers
Market conditions were favorable overall. Insurers who implemented significant appetite shifts in the harder market cycle became more open to negotiation and many began transitioning toward 'all risks' portfolios. Capacity was abundant; however, challenges continued for Energy and Life Sciences risks. Price reductions were the norm - with the notable exceptions of risks with significant changes in business operations, size or structure - as new entrants and longstanding insurers competed for business. Coverage restrictions introduced during the hard market were reconsidered. Looking ahead, current market conditions are expected to continue, with the key exceptions of challenging or recession-vulnerable industries and risks. Incumbent insurers seeking to achieve retention targets are expected to demonstrate flexibility on coverage requests, leading to broader terms and conditions.
Property
Driven by improved insurer performance and appetite for growth, upward price increases continued to moderate in Q3; however, challenging occupancies continued to experience more significant increases. Underwriting discipline continued but was more relaxed in some respects; e.g., home office referrals were less common. However, demands for risk information and risk quality continued, with both being critical to securing a superior outcome. Inflation was a growing underwriting concern. Natural Catastrophe limits were under scrutiny as insurer focus on the impact of climate change on "secondary" perils grew. Looking ahead, the general stabilization trend is expected to continue in the short term; however, challenges and uncertainty will remain. Inflationary pressure will continue to impact valuations. End-of-year treaty renewals will be an area of focus – especially related to Natural Catastrophe placements.
Trade Credit
Market conditions remained challenging, driven by ongoing supply chain challenges, inflationary pressures and uncertainty related to the geopolitical events in Eastern Europe. Despite sufficient capacity in the market, material price increases continued. Underwriting was rigid and rigorous, and insurers were focused on policy language and risks in challenging countries. Looking ahead, current market conditions are expected to generally continue. Appetite and capacity may become more limited for risks in challenging countries; however, insurers are expected to remain focused on supporting client needs by innovating new client solutions.
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