Natalia Char
Head of Commercial Risk Solutions, Latin America
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Inflation has had a real impact on exposures and underwriting approaches. Insureds should remain diligent in managing values and documenting valuation methodologies to avoid gaps in coverage and limits and to secure favorable underwriting engagement.
Regional Overview
- As treaty renewals approached, insurer conservatism increased, underwriting became more rigorous, coverage restrictions were imposed in pockets, and limits came under greater scrutiny. Natural Catastrophe and environmental-exposed risks experienced the most challenging market conditions.
- Inflation and supply chain challenges continued to increase claims costs, pressure pricing and create uncertainty for insurers.
- Market conditions improved in pockets. Most notably:
- Cyber and D&O placements
- Strikes Riots and Civil Commotion coverage, in stable countries
- Risks in countries with low Natural Catastrophe risk
- All-Risk wording came under significant scrutiny and many insurers replaced it with risk-specific language that could be priced more effectively.
Q4 Market Dynamics
Pricing (+1-10%)
Inflation and supply chain challenges continued to pressure insurer pricing, and modest increases continued across most products and risk types. Cyber and Property – especially, Natural Catastrophe exposed risks – experienced more significant increases while new capacity in the Excess Directors & Officers space and strong competition in the Auto space led to further pricing deceleration.
Capacity (Ample) Capacity remained generally sufficient, with the key exceptions of Cyber, Environmental and Natural Catastrophe exposed risks. New Excess Directors & Officers capacity mobilized.
Underwriting (Rigorous) Underwriting scrutiny and conservatism increased as insurer focus on profitability continued and concern over treaty renewal terms grew throughout the quarter. Underwriter queries related to ESG practices as well as Strikes, Riots and Civil Commotion exposure continued, and extensive underwriting information was required to secure underwriting engagement. Cyber insurers often required external scanning prior to quoting.
Limits (Flat) While limits were generally stable, limit reviews were conducted as inflation pressured values upward. Loss-active risks experienced limit scrutiny.
Deductibles (Flat) Expiring deductibles were achieved in most cases with the key exceptions of poor-performing, loss-active risks as well as Cyber placements, for which coinsurance was also required in some cases.
Coverages (Stable) Demand for stand-alone coverage for Strikes Riots and Civil Commotion was strong despite limited market appetite, although insurer positions were more flexible in geo-politically stable countries such as Chile. Expanded coverage terms were introduced for D&O and Cyber placements.
Q4 Product Summary
Automobile (Moderate)
Underwriting remained conservative, but appetite was healthy for well-performing risks, and capacity was abundant for most risks, with the notable exceptions of those with non-preferred, higher-risk exposures or poor performance.
Casualty / Liability (Moderate) While market conditions generally remained moderate and stable, challenging conditions such as reduced capacity and increased pricing were experienced by higher-risk industries. Appetite for certain Environmental risks expanded slightly.
Cyber (Challenging) As cyber attacks continued across the region, rate increases remained high, with manufacturing and natural resources risks experiencing the most challenging conditions. Early signs of a slight market improvement emerged.
Directors & Officers (Soft) New insurers seeking to build their portfolios offered aggressive pricing, which served to soften the market as existing insurers sought to retain their portfolios. Capacity was limited and pricing was elevated for US listed risks.
Property (Challenging) Recent catastrophic events further deteriorated the profitability of Property insurers, and Natural Catastrophe capacity was scarce. Risks were evaluated more rigorously. Anxiously-awaited treaty renewals were a key topic of underwriting discussion.
Trade Credit (Moderate) Insurers remained focused on economic conditions and insolvency rates. Appetite and capacity deployment were highly dependent on industry sector and client financials.
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