Q4 Trends by Line of Business
Market conditions remained moderate. Supply chain challenges, inflationary pressures, and rising verdicts continued to drive up loss costs, but competitive forces and the growing availability of Alternative Risk Transfer solutions served to dampen the market impact, keeping pricing near flat to modestly up. Non-US domiciled risks with US-exposed fleets were heavily scrutinized and required extensive underwriting information. Fleet safety control remained an area of focus for underwriters. Innovative technologies continued to evolve risk profiles and enhance underwriting approaches and product offerings.
Market conditions remained moderate with sufficient capacity and flat to modestly upward pricing. Primary and low-layer Excess placements experienced moderate conditions while higher Excess layers saw more volatility. US exposures on non-US domiciled risks came under scrutiny and capacity restrictions were introduced in some cases. Coverage enhancements were available for well-performing risks with quality underwriting information. Claims inflation and large losses dominated underwriting discussions, and concern over prior year deterioration continued.
Market conditions for E&O and Cyber insurance stabilized; while they remained challenging in certain geographies and industry sectors, they generally became more buyer friendly than in trailing quarters Insurers continued to see positive improvement to profitability, with loss ratio improvement as claims frequency declined amidst a higher rate environment when compared to 2021. Clients continued to have access to new capacity, which further stabilized the rate environment. Risk management and overall cyber risk maturity, cyber security improvements made since prior year, and previous market adjustments all helped position clients well when entering the insurance market. Underwriting remained rigorous and stringent. Insurers continued to scrutinize the coverage offered for critical infrastructure, systemic, correlated events, and war, with certain insurers restricting coverage on either a generalized or event-specific basis, all perceived to create aggregated risk to the market that could be catastrophic to any particular insurer.
Directors and Officers
Market conditions remained favorable. While some insurers preferred to preserve the limit contraction achieved in prior years, an influx of new insurers and generally broader market appetite created healthy competition, continued price improvement – especially, where pricing had been significantly adjusted in 2020 and 2021 – and sufficient limit availability in all but the most challenging classes of business (e.g., digital assets, cannabis). Underwriting remained flexible and insurers offered options such as multi-year placements, compensation clawbacks, and distressed company solutions. Global mandates related to the geopolitical events in Eastern Europe continued and underwriting discussions focused on ESG, resilience to inflation and supply chain challenges, and cyber and privacy protocols. US-listed exposure (on non-US domiciled risks) remained under scrutiny with limited capacity which was expensive (but moderating). Losses from event-driven litigation and rising derivative settlement amounts continued to impact insurer outlooks.
Challenging treaty renewals, Natural Catastrophe losses – including those related to Hurricanes Ian and Fiona, typhoons and heavy rainfall – geopolitical events, inflation, and asset valuations dominated insurer discussions and created complexities in a market that remained moderate to challenging, except as respects Natural Catastrophe and Political Violence coverages, which experienced difficult market conditions. Some insurers sought to de-risk to reduce portfolio exposure. Underwriters replaced unnamed Contingent Business Interruption (CBI), which was difficult to model, with named CBI and sub-limits were required or reduced in some cases. Combined BI/PD deductibles gave way to Time Element deductibles. Alternative risk transfer solutions and higher retentions became important levers to achieving program goals. Complete and updated submissions – including detailed responses to recommendations - were required to achieve superior placement outcomes.
Client demand for Trade Credit solutions increased due to higher interest rates and tighter margins. Despite recessionary concerns, insurer appetite remained healthy, and pricing remained flat to slightly down, but capacity deployment – which exceeded pre-pandemic levels – was largely dependent on industry sector and client financials. Aimed at meeting growing demand for liquidity, alternative credit solutions were innovated in pockets. There was a continued transition to non-cancellable limit programs. Underwriters sought market syndication as a mechanism to diversify their portfolios.