Q4 Market Dynamics
Pricing
Modest price increases continued, driven upward by myriad factors including inflation and anticipation of treaty renewals, while improved insurer performance, increased capacity, and insurer focus on retention and growth continued to have a dampening effect. While conditions were moderate overall, sectors and risks deemed likely to create volatility for insurers experienced a more conservative and challenging pricing environment, with Natural Catastrophe Property experiencing the most significant increases.
Capacity
While inflation-driven increases in values and losses led to additional capacity demand, capacity remained sufficient across most products as new capital continued to enter the market and existing insurers sought to retain and grow their market share. Key exceptions included Natural Catastrophe-exposed Property, and Political Violence and Terrorism, which experienced tight capacity and often required additional solutions such as captives, reinsurance and alternative program structures.
Underwriting
The two-tiered nature of the underwriting environment became more pronounced. Well-performing risks with robust underwriting information in targeted classes experienced a flexible but disciplined environment while poorer-performing, out-of-appetite risks – especially those with insufficient underwriting detail – experienced limited appetite, rigorous underwriting and few options. Underwriter discussions were dominated by three themes: social, core and claims inflation, concern over upcoming treaty renewals, and continued geopolitical instability.
Limits
Limits trended upward, in line with inflation-driven increases in exposures and loss costs. Loss-active risks experienced limit scrutiny, and limit reviews gained prevalence in some geographies and products. Some Excess insurers continued to require higher Primary limits. Client demand for restoring limits reduced in recent years has not materialized at the pace expected.
Deductibles
Deductibles remained stable, although increases were required for challenging risk types such as those with Natural Catastrophe exposure, as well as poor-performing risks, and risks deemed to have insufficient controls. In addition, minimum deductibles were applied to designated business sectors. The trend to withdraw combined Property Damage / Business Interruption deductibles in favor of Time Element deductibles continued.
Coverages
Despite a moderation in general market conditions, insurer appetite for the reinstatement of “soft market clauses” remained limited. While coverages remained generally stable, restrictions continued in targeted areas including Cyber, Terrorism, War and Sanctions, Strikes Riots and Civil Commotion, Infectious Disease, and Margin Clauses / Values Limitation Clauses in cases where asset values were insufficiently substantiated.
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