Amrae says capacity has stabilised in France but buyers still face tough renewal

Things are improving for French commercial insurance buyers but pressure from the reinsurance side of the business will continue to create challenges at upcoming renewals, the country’s risk management association Amrae says in a new report.

Its annual State of the Market survey found that capacity has stabilised in most lines, with good risks even able to obtain higher limits in certain cases. Increases of 10% have been offered to some buyers.

Amrae also concluded that risk managers will have the opportunity once again to prove their mettle in future renewals. They will need to sell their companies’ risks to underwriters that continue to be cautious, and explain to their bosses why insurance budgets are unlikely to fall any time soon.

“Risk managers must engage negotiations with their insurers as early as possible,” said François Beaume, a vice-president at Amrae, during a press conference.

Competition between insurers has become fiercer as technical results have improved in the past few years, and the arrival of new sources of capacity in France is helping to put a brake on the hard market in most segments, says Amrae.

One exception is cyber insurance, where capacity continues to go down. Strikes, riots and civil commotion insurance is another tough risk to transfer. Here, capacities have fallen since 2018, and the situation has become even worse in France after a series of riots in June.

Buyers in specific sectors may also meet difficulties in finding the limits they need. Food companies, which face concerns about their risk management practices, can expect limits between 10% and 15% lower than before, according to the Amrae research. Other sectors in similar situations include wood processing, waste management, pulp and paper, and those recycling li-ion batteries.

In general, despite the improvements noticed by Amrae, the next renewals are expected to be challenging for French companies. This is mainly because primary insurers face higher costs to renew their treaties, as reinsurers continue to deal with a spike in natural catastrophe losses and geopolitical uncertainties, such as the war in Ukraine, it says.

“Reinsurers started to put pressure on renewals last year, and that pressure is still going on,” Beaume pointed out. Risks exposed to climate change are especially problematic.

As a result, premium rates will continue to rise, although at a more moderate pace than in previous years, says Amrae. Rate increases have been generally limited to no more than 15% in the latest renewals, it explains.

Another green shoot is the return of long-term agreements, which have started to appear in the market again. The rollover of some multi-annual contracts has also been observed.

On the risk retention side, the report says that insurers continue to be tough with their deductible requirements, although things have stabilised to a degree here too.

Below summarises the most important trends identified by the report, which was produced in conjunction with six leading French brokers.

Property with high nat cat exposure: Amrae expects capacities to drop by around 30% at the next renewals, while rates should increase by roughly the same amount. Deductibles are also set to increase by around 30%.

Property without high nat cat exposure: Capacities are flat in theory, but often reduced in practice for the least attractive accounts. CBI and political violence covers are a source of concern. Premium rates vary according to the perception of the quality of risk management, with the best accounts striking price reductions but the more complex risks facing significant increases.

Political violence and terrorism: Capacities are on the slide by up to 20% as some insurers and London coverholders have left the segment, and reinsurance treaties put remaining underwriters under pressure. Regions like the US, UAE, Egypt, Latin America and South Africa present particular challenges. Russia, Ukraine, Belarus and other neighbouring countries have been targeted by exclusions. Buyers that can find capacity need to be prepared to pay rates up to 15% higher for terrorism and 80% higher for political violence and SRCC.

Construction: Capacity is stable in France but insurers have shown little appetite for the risk. The number of players in the market is very limited.

Motor: Some players have left the road assistance and fleet segments, and others have reduced their risk appetite. Even then, capacity remains stable, although rates are on the rise. Good risks face prices 5% higher at the next renewals, while for others the hike may reach 20%. Deductible demands may be up to 30% higher. Rent-a-car and transportation firms should experience even tougher renewals.

Cargo and marine: Capacity has risen for three years and has been helped by the arrival of new players like QBE and Berkshire Hathaway to the French market. But insurers continue to be vigilant about the limits they offer, and coinsurance arrangements are often required. Finding covers for the region around Russia and Ukraine is increasingly hard.

Liability: The market is dynamic and there is plenty of capacity for French buyers, except when it comes to US risks and sectors such as automotive, defence and food production with exposure to product recall. But rates should rise between 5% and 10%, mostly due to the impact of inflation.

Cyber: Capacities are still dropping and it is hard to find insurers that offer more than €5m per risk. But Amrae has spotted that some underwriters are starting to show a bit more appetite, and new players like Arch have entered the European market. Fiercer competition has helped to brake rate increases, and Amrae says that the best risks may even benefit from reductions. Sectors that have more difficulty finding cyber cover include hospitals, local governments and SMEs.

Financial lines: D&O capacities are on the rise, reaching up to €370m in total, with most actors offering around €15m on an individual level. The best accounts can obtain up to €25m from a single insurer. For fraud and EPL, stability has been the norm. The situation tends to be more difficult, however, for risks with US exposure.