Q4 Automobile Summary
Overall (Soft)
Continued “light” road activity has led to favorable claims results. As a result, market conditions remain competitive, with flat pricing and a favorable underwriting environment.
Pricing (Flat)
A highly competitive marketplace is serving to keep rates stable and expiring pricing is available for most placements.
Capacity (Ample) Capacity is sufficient and remains stable.
Underwriting (Flexible) The market is highly responsive to claims activity, so reduced road activity has resulted in a highly competitive market, particularly for new business.
Limits (Flat) With stable and sufficient capacity, expiring limits can be achieved for most placements with additional limit available when required.
Deductibles (Flat) Expiring deductibles can be achieved in most cases, with the key exception of loss-active risks; however, many insureds are exploring increases to retention levels for Auto and some other less volatile areas of their portfolio to optimize risk transfer cost.
Coverages (Stable) Coverage remains stable with no material changes.
A Look Ahead (Moderate) As insurer budgets are reset, appetite is expected to expand and favorable market conditions are anticipated. This may be at least partially offset as road activity and claims increase.
Q4 Cyber Summary
Overall (Challenging)
The market continues to be volatile and challenging, with steep pricing corrections across all sectors, segments and risk types.
Pricing (>+30%)
There is significant rate pressure across-the-board, with some SME risks experiencing severe increases.
Capacity (Constrained) Underwriters have been more rigorous in their approach to renewals, with capacity deployment being a major area of focus. Underwriters have equally reviewed their broader aggregate exposure across industry segments and introduced aggregate exposure capacity reductions.
Underwriting (Rigorous) Underwriting is highly principled and rigorous, requiring detailed supplemental questionnaires.
Limits (Decreasing) Capacity constraints have led to limit reductions for some risks. Ransomware is being sub-limited.
Deductibles (Increasing) Deductibles are increasing, driven by insurer mandates as well as insureds looking to manage premium costs.
Coverages (Restricting) Security controls are critical in securing the best coverage terms available. There is a growing trend for underwriters to include Multi Factor Authentication as a subjectivity, especially for risks in the SME segment.
A Look Ahead (Challenging) Heightened underwriting focus on controls is expected. Only organizations that demonstrate excellence in risk maturity are likely to achieve their targeted limits and terms. Appetite may further contract, making some organizations essentially uninsurable.
Q4 Employers Liability/Workers Compensation Summary
Overall (Challenging)
Insurer appetite for new business is limited, unless the program is performing exceptionally well and falls within a sector the insurer has targeted for growth. The Excess of Loss market remains particularly challenging.
Pricing (+1-10%)
Portfolio-wide rate increases continue, with the key exception of insureds which have materially improved their claims performance.
Capacity (Constrained) Excess of Loss capacity is becoming a significant issue for poor performing programs, as the market is limited for this coverage. Some insureds have materially increased their deductible in order to attract capacity to their program. (Traditional Workers' Compensation policies are statutorily required, so capacity is not an issue.)
Underwriting (Prudent) Insurers are becoming increasingly selective on the risks they are willing to underwrite. This is a consequence of a limited imperative to write new business as well as insurer pricing teams influencing risk selection.
Deductibles (Increasing) Material deductible increases are being imposed on Excess of Loss placements with claims activity.
Coverages (Restricting) Insurers are reviewing their positions on overseas common law exposures, often leading to more restrictive cover by way of reduced sub-limits and/or broader exclusionary language (e.g., removing cover for communicable diseases).
A Look Ahead (Challenging) Current market conditions are expected to continue.
Q4 Trade Credit Summary
Overall (Challenging)
The impacts of COVID-19 led the country to its first recession in more than 30 years. In the face of great uncertainty, insurers imposed significant rate increases across-the-board, and withdrew capacity. While the uncertainty has largely subsided, the underwriting community remains highly cautious and conservative, especially related to COVID-impacted risk types.
Pricing (Down)
The market reacted to COVID-19 driven uncertainty by raising rates; however, government stimulus packages and changes in insolvency laws actually served to decrease insolvencies in 2020 and early 2021. While the number of insolvencies has increased, it remains well below normal levels. Rate decreases have therefore been introduced, and the market is becoming competitive.
Capacity (Constrained) Insurer appetite and capacity contracted sharply in 2020 but has recovered somewhat in 2021, with acceptance rates returning to pre-COVID levels (albeit with a lower exposure base). Insurers remain cautious on travel, leisure, tourism, retail and construction, and capacity constraints continue for these risks.
Underwriting (Prudent) Underwriting is cautious and conservative, particularly for the industries most susceptible to the ongoing impacts of COVID-19.
Limits (Increasing) Credit limit acceptance rates have improved significantly in 2021 but insurers remain cautious related to risk concentration and deployment of large limits.
Deductibles (Flat) Expiring deductibles are the norm.
Coverages (Broadening) Insurers are demonstrating more flexibility in offering broader terms in light of increasing competition and a focus on growth.
A Look Ahead (Soft) A further softening of the market is expected as the uncertainty of 2020 and 2021 subsides and insurers refocus on growth.
Q4 Casualty/Liability Summary
Overall (Challenging)
Insurers remain focused on underwriting for profit instead of growth as the Australian market combined ratio is still under threat from loss development. Rates are still increasing across portfolios to address prior losses, as social inflation and inflationary pressures continue to have a profound effect.
Pricing (+11-30%)
In light of a net combined ratio exceeding 100%, insurers are imposing rate across their portfolios in order to recover and correct positions from long tail claims. Substantial rate increases are being imposed on unprofitable risks and/or those in specific sectors, with further pressure coming from reinsurance treaties.
Capacity (Ample) There is sufficient capacity within the market for most sectors and risks but it is continually being reviewed. Risks within the coal, bushfire, sexual abuse or claims affected sectors are experiencing a notable contraction of capacity.
Underwriting (Prudent) Head office referrals remain prevalent with some local insurers completely bound to decisions made from overseas head offices. Insurers are working with insureds, however, they are constrained in their level of underwriting authority.
Limits (Flat) Limits are sustainable for the majority of sectors and risk types, however, some sectors and risk types such as bushfire, thermal coal and sexual abuse remain challenged. Some insureds are working with Aon to conduct limit modelling in order to quantify historically high limits purchased in a softer market.
Deductibles (Increasing) There is a renewed focus on deductible adequacy with significant attention on worker-to-worker deductibles. Deductibles are increasing across-the-board for loss affected risks and sectors as insurers look to remove attritional type losses from their portfolio.
Coverages (Restricting) Enhancements to coverage that were provided in the soft market are under review as insurers look to tighten coverage. Problem areas continue to include sexual misconduct, frequency-exposed risks, large worker-to-worker risk exposed risks, as well as mining, tailings, coal and bushfire exposure. Insurers are also looking closely at contractual liability exposures and asking more questions around indemnities and hold harmless clauses. Insurers are reviewing coverage related to COVID-19, with exclusions applied for most risks and industries.
A Look Ahead (Challenging) There will likely be a sharper focus on the Casualty space in 2022 as it remains unprofitable.
Q4 Directors and Officers Summary
Overall (Challenging)
Market conditions remain challenging, but have moderated. Price increases continue, but are decelerating. New capacity has entered the market, enabling program limits to be met more readily than earlier in 2021 and creating some competitive tension.
Pricing (+11-30%)
Pricing varies widely, with risks that experienced severe adjustments at recent past renewals often seeing smaller increases now, and challenged risks still experiencing very significant increases.
Capacity (Ample) Changes in buying behaviors, as well as the introduction of new capacity, have led to a sufficient level of capacity in the market.
Underwriting (Rigorous) Underwriting authority is transitioning back into local underwriting teams, leading to a generally more efficient process. However, with the current rigorous and detailed underwriting environment, quotes are often only issued within 30 days of renewal.
Limits (Decreasing) Due to the cumulative increases in premium over the past three years some insureds are re-evaluating their limits, with a downward trend on Side C limits amongst some large risks.
Deductibles (Flat) There is a continued sentiment that premium credits offered for deductible increases are not commensurate with the additional risk assumed so most placements are renewing with expiring deductibles unless increases are mandated.
Coverages (Restricting) Silent Cyber and Infectious Diseases Exclusions continue to be applied to placements for risks in specific industries. In addition, restrictions for investigations and insolvency are being introduced.
A Look Ahead (Moderate) The market will continue to moderate, with improving market appetite for in-appetite risks. Appetite for non-targeted risks will remain limited.
Q4 Property Summary
Overall (Challenging)
Market conditions remain challenging as insurers maintain their conservative approach to capacity deployment, pricing and deductible structures. Insurers are looking to grow but remain cautious around potential impacts on narrow margins.
Pricing (+11-30%)
Rate increases continue as insurers remain focused on profitability. Insureds continue to explore options for achieving palatable pricing. The difference in pricing between ‘core appetite’ occupancies and geographies and other, more challenged or volatile risk types continues to expand, with the former experiencing greater capacity availability and in turn, competitive tension.
Capacity (Constrained) Appetite remains targeted and capacity restrictions continue as insurers remain focused on profitability. Insurers are cautious around capacity deployment for natural perils, with a shift in focus from higher hazard areas to frequency events.
Underwriting (Rigorous) Referral processes and actuarial reviews have created notable underwriting delays. It has become even more critical to start the renewal process early.
Limits (Flat) Expiring limits can be achieved in most cases although some insurers have been given global mandates to reduce aggregate natural catastrophe exposure in Australia following the continued increases in weather-related loss events.
Deductibles (Increasing) There is less emphasis on raising "each & every" deductibles and greater focus on peril-specific deductible increases driven either by specific insured exposures or portfolio optimization.
Coverages (Stable) Expiring coverages can be achieved in most cases; however, as a La Nina-affected summer approaches, weather-related coverage is under close watch and may impact insurer responses in 2022 and beyond.
A Look Ahead (Challenging) Rate increases, tight capacity, and rigorous referral underwriting are expected to continue although there are signs of stabilization for some risks with less volatile exposures.
China Market Dynamics
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