Geography Trends Q4 Latin America

Colombia

Market Dynamics

Q4 Automobile Summary

Overall (Moderate)

While current market conditions are moderate, rising new car prices and auto repair costs, as well as an increase in car thefts, are driving up loss ratios. As a result, some modest rate escalation and underwriting conservatism is emerging.

Pricing (+1-10%)

Insurer pricing is driven by portfolio experience as well as individual risk performance. Risk modelling tools are more important than ever to negotiate effectively with underwriters to achieve favorable pricing.

Capacity (Abundant) Capacity is stable and abundant.

Underwriting (Prudent) Underwriters are generally cautious, however, there is some flexibility, especially for well-performing risks.

Limits (Flat) Expiring limits can be achieved in most cases.

Deductibles (Flat) Expiring deductibles can be achieved in most cases.

Coverages (Stable) Expiring terms and conditions can be achieved in most cases. A new usage-based product has been introduced, offering traditional coverages with an alternative pricing approach.

A Look Ahead (Moderate) The market is expected to become slightly more challenging as insurers continue to respond to rising costs. Continued innovation of insurer pricing models is expected.

Q4 Cyber Summary

Overall (Challenging)

The Cyber insurance market is challenging as rates continue to climb sharply, capacity continues to contract, and ransomware risk grows to become one of the most volatile and important issues across society. The number of organizations seeking coverage continues to grow.

Pricing (>+30%)

Pricing is up significantly, especially for complex risks in the energy, financial institutions, fintech, utilities, technology, education, and health sectors. Controls and security are paramount to achieving the most favorable pricing possible.

Capacity (Constrained) Capacity is constrained and per-risk capacity continues to contract. There are a limited number of local insurers in this space and some have narrow appetite (e.g., small risks only). Additional capacity is available through the reinsurance market if needed. Some insurers – primarily concerned with ransomware risk – are insisting on coinsurance arrangements.

Underwriting (Rigorous) Underwriting requirements are extensive; supplemental questionnaires are required to start the underwriting process and in some cases, insurers are conducting remote assessments before considering underwriting a risk. Proper risk controls are critical. The underwriting process is time-consuming and an early start will yield the best results.

Limits (Flat) It has become increasingly difficult to secure expiring limits at palatable pricing. When expiring limits are purchased, additional layers and insurers are generally required to complete the placement. Business Interruption, Cyber Extortion, and Crisis Management coverages are often sub-limited.

Deductibles (Increasing) Business Interruption and Ransomware are experiencing deductible increases, including coinsurance up to 50%. Other coverages, like reputation expenses, notification, monitoring, and defense expenses are often not be subject to a deductible.

Coverages (Stable) Ransomware and Cyber Extortion are being excluded or severely limited by some insurers.

A Look Ahead (Challenging) Current market conditions are expected to continue – and perhaps become even more challenging - as cyber threats and attacks continue. Insurers are expected to further refine their appetite and capacity deployment and impose co-insurance to limit their exposure. Cyber controls and risk maturity will become increasingly important.

Q4 Property Summary

Overall (Challenging)

The market remains challenging as insurers focus on returning to profitability. Insureds are experiencing significant price increases, constrained capacity, and a stringent, rigorous underwriting environment.

Pricing (+11-30%)

Price adjustments continue as insurers focus on profitability. Sabotage and Terrorism coverage are experiencing very significant price increases.

Capacity (Ample) Local capacity is available and sufficient for most risks; however, chemicals, plastics, and textiles are experiencing capacity constraints.

Underwriting (Rigorous) Underwriters have become more stringent and underwriting information requirements have increased.

Limits (Flat) Expiring limits can be achieved in most cases, with the exception of Sabotage and Terrorism, where limit reductions are being imposed.

Deductibles (Increasing) Deductible increases are being imposed for natural catastrophe-exposed risk and fire coverage.

Coverages (Stable) Expiring coverages can be achieved in most cases with the exception of Sabotage and Terrorism, where coverage reductions are being imposed.

A Look Ahead (Challenging) Current market conditions are expected to continue as insurers focus on profitability. Rate increases will continue, and capacity will remain limited. The quality of risk protection will be an important factor in securing favorable outcomes.

Q4 Casualty/Liability Summary

Overall (Challenging)

Market conditions are challenging. Large losses, the long-tail nature of claims, and unprofitable pricing in recent years has led to a contraction of appetite, especially for hazardous risk types. Several insurers have withdrawn from this space, and those that remain offer limited capacity for large, complex risks. In addition, underwriting authority has transitioned away from local teams, requiring greater reliance on international / reinsurance markets which tend to offer less favorable pricing.

Pricing (+11-30%)

Poor portfolio performance and limited capacity are leading to material rate increases.

Capacity (Constrained) The shift in underwriting to central teams – which are more conservative in their capacity deployment – has constrained capacity for the market at large. Only a limited number of insurers have sufficient capacity; others leverage facultative reinsurance or request special authorization from central underwriters.

Underwriting (Rigorous) Most underwriting has shifted to regional or global underwriting teams, which may not have the same level of local knowledge and expertise and as such tend to be more conservative in their pricing and terms offered.

Limits (Decreasing) Some insureds are exploring limits reductions as a mechanism for offsetting rate increases.

Deductibles (Flat) Expiring deductibles can often be achieved on low claims frequency risks while high-frequency / long-tail risks such as energy, power and facilities may experience deductible increase mandates. Deductible increases have also become common on primary placements, as there is less insurer appetite.

Coverages (Restricting) COVID-19 and Silent Cyber exclusions continue to be mandated. In addition, reinsurers have become less flexible in accommodating requests to include custom clauses that differ from traditional / Lloyds accepted forms.

A Look Ahead (Challenging) In the short run, current market conditions are expected to continue. Insurers are expected to focus on profitability while imposing significant rate increases and deploying capacity on a limited basis. Complete, robust underwriting information will remain critical to ensuring favorable insurer responses.

Q4 Directors and Officers Summary

Overall (Challenging)

The local regulator, Contraloria, has modified the interpretation of claims-made reporting requirements and implemented regulations requiring insurers to cover risks not anticipated in their coverage forms. This has devastated the local market and many insurers have withdrawn from any risk that could have exposure to Contraloria regulations.

Pricing (>+30%)

Companies without exposure to Contraloria may experience material – but not severe – rate increases, while those in sectors such as financial institutions, government, construction, and oil and gas, are experiencing severe rate increases.

Capacity (Constrained) Following the Contraloria ruling, local underwriters have limited their capacity across-the-board; however, reinsurers remain available to augment local capacity as needed.

Underwriting (Rigorous) Underwriting rigor has intensified as underwriters seek to determine Contraloria exposure. Extensive claims details are being requested, including those related to ongoing litigation such as probability studies.

Limits (Flat) Private D&O limits remain stable despite rate increases; however, companies that face regulatory risk from Contraloria are experiencing limit reductions due to lack of insurer capacity or of their own choosing, as a mechanism to help offset premium increases.

Deductibles (Flat) Side C deductibles for risks with US exposure are increasing sharply.

Coverages (Stable) Following the coverage clarifications that occurred during recent renewal cycles, coverages have generally stabilized.

A Look Ahead (Challenging) The ruling from Contraloria set a dramatic precedent which has raised questions amongst insurers regarding insurance law. Claims paid over the last few months may take years to be absorbed by insurers and therefore, could continue to affect capacity and pricing.

Q4 Trade Credit Summary

Overall (Moderate)

Credit markets experienced major disruption as a result of COVID-19; however, as the economic impacts of the pandemic have largely relented, the insurance marketplace has stabilized and moderated.

Pricing (Flat)

Following the price adjustments in 2020 and early 2021, market pricing is stable, and flat renewal pricing can often be achieved.

Capacity (Ample) Capacity is generally sufficient; however, insurers are deploying it cautiously based on their underwriting policies and appetite.

Underwriting (Prudent) Despite better-than-expected losses in 2021, insurers remain conservative in their underwriting due to lingering concern that COVID-19 losses may still materialize.

Limits (Increasing) Limit increases are available as growth occurs across several key sectors.

Deductibles (Flat) Expiring deductibles can be achieved, but often only in conjunction with a rate increase.

Coverages (Stable) Expiring coverages can be achieved in most cases; however, coverages previously included at no additional charge may now carry an additional premium.

A Look Ahead (Moderate) The importance of Credit insurance is growing as the economy grows. Insurer appetite is expected to refocus, with some insurers targeting specific lower-risk niches.

Mexico Market Dynamics

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