Ben Rolfe
Head of Commercial Risk Solutions, Australia
“
More than ever before, buyers should forensically review their exposure ensuring coverages reflects their ongoing need in a post-COVID and inflationary-driven environment. In today’s market environment, 'nice to have' coverage can put unnecessary burden on pricing and capacity.
Paul Young
Head of Commercial Risk Solutions, Asia
“
Engaging with insurers across the portfolio rather than narrowly, for one product, deepens the relationship and may encourage insurers to look beyond only in-appetite products and risks.
Regional Overview
- Insurer focus on profitable growth and retention continued. Underwriting remained selective and valuations remained under scrutiny.
- Rising interest rates continued to create offsetting impacts. While increasing claims costs pressured pricing, increasing investment income served to dampen pressure on underwriting profit.
- Risks in parts of the region that are susceptible to Natural Catastrophe events such as heavy rainfall, typhoon and drought, which continue to increase in frequency and severity, experienced challenging market conditions which were exacerbated by lagging loss modeling.
- Insurers with cumbersome referral processes and centralized underwriting authority were in some cases challenged to compete with agile insurers able to provide timely, responsive capacity and quotes.
- Demand for international insurance programs grew as businesses in the region continued to expand beyond local geographic borders.
Q4 Market Dynamics
Pricing (+1-10%)
Following the deceleration of rate increases earlier in the year across most products and geographies, the trajectory shifted slightly in Q4, most notably, in the Property market, as insurers became more conservative in anticipation of challenging treaty renewals. While pricing conditions remained moderate overall, sectors and risks deemed likely to create volatility for insurers experienced more significant increases.
Capacity (Ample) Capacity expanded in some areas targeted for insurer growth and was sufficient for most products with the key exceptions of Cyber, Terrorism, Products Liability / Recall, and Natural Catastrophe-exposed Property, which remained under pressure. New capacity mobilized in the Directors & Officers space, serving to soften the market considerably.
Underwriting (Prudent) Insurers sought growth and expanded their appetite in targeted areas (e.g., middle market risks) but remained cautious of their bottom line. Quality and detailed underwriting information was a key enabler of superior renewal outcomes.
Limits (Flat) Limits remained stable as portfolio mandates were uncommon; however, inflationary impacts on asset values led to reconsideration and adjustment of limits – especially, those related to Natural Catastrophe risks – by both insurers and insureds.
Deductibles (Flat) Deductibles were broadly stable, although increases were applied to trending loss areas and poor performing risks. In addition, minimum deductibles were applied to designated business sectors.
Coverages (Stable) While coverages remained generally stable, restrictions continued in targeted areas including Cyber, Terrorism, and War and Sanctions, especially related to Ukraine, Russia, Belarus and Myanmar.
Q4 Product Summary
Automobile (Moderate)
While replacement vehicles and parts became easier to source, some supply chain challenges persisted and inflation continued to drive up claim costs, leading to a moderate market environment.
Casualty / Liability (Moderate) Medical and wage inflation, coupled with a rise in litigation in many Asian countries, had an adverse effect on claims costs. As a result, losses – especially, large losses – weighed more heavily in underwriting decisions. Products Liability / Recall experienced notable capacity challenges.
Cyber (Challenging) The market remained distressed but showed signs of stabilizing, as risk management improved, and retentions reached levels deemed sustainable by insurers. While rate increases continued, they varied widely based on risk management maturity and the level of adjustment made in prior years.
Directors & Officers (Soft) Driven by the continued drop in securities class actions filings, fewer corporate insolvencies than expected, and the mobilization of new capacity, competition increased, and pricing decreased – especially for risks which were significantly adjusted recently. US-listed risks experienced a more challenging environment as pricing moderated but remained firm.
Property (Challenging) Natural Catastrophe events continued to drive large losses and pressure market conditions. The (more expensive) reinsurance market drove rate increases for both local and international insurers. Underwriters sought to impose sub-limits and increase deductibles.
Trade Credit (Moderate) With a recession already underway in some economies, defaults began to rise, signaling an increase in losses. Underwriter caution heightened as business KPIs came under scrutiny.
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