UK buyers can expect concessions at next renewal as softening spreads: Gallagher

UK insurance buyers should win concessions from insurers at future renewals as competition for commercial and specialty business intensifies, according to broker AJ Gallagher.

The commercial and specialty insurance market continues to shift, with most P&C lines now experiencing rising competition, Jonathan Turner, CEO at Gallagher Specialty, told Commercial Risk.

“In aggregate, there has been a levelling off of rates and we are at a stage now where we are starting to see pricing come off. That is new,” he said.

“We have had pockets of the market – notably directors and officers (D&O) and cyber – where there has been an extended period of competition and rate decreases,” he continued. “But today there are more and more lines of business where carriers and capacity providers are hungry. There are very few segments where pricing is going up, including catastrophe-exposed North American property, where we are seeing more willingness to accept exposures that carriers would not touch 12 months ago. Over the last two months this has become more obvious,” Turner explained. “If there are no shock catastrophe events, I can’t see competition slowing down.”

The supply-demand dynamic is shifting but insurers remain disciplined, according to the broker. “We have seen reasonable discipline from underwriters. They know there is theoretical margin in the rates they are charging, so they can live with being challenged on pricing. But so far, it has been disciplined, and how long that lasts we will have to wait and see,” he said.

Mounting competition puts corporate insurance buyers in a much stronger position to leverage their business to gain concessions from insurers, and not just on price, according to Turner. In the current market, buyers can look to buy more limit, lower deductibles and/or push for improved terms and conditions, he said.

“Clients should feel confident about the market environment and what they are able to achieve, whether that is spend, coverage or a combination of the two. There is a real opportunity for risk managers and corporate buyers. So don’t rule anything out and be prepared to kick the tires on what the market is prepared to offer. There is a lot more appetite than there has been for some time,” said Turner.

“There is more appetite out there for risk than there was a year or 24 months ago. The landscape has shifted, so things that weren’t possible to achieve over the last couple of years now are,” he continued.

Competition in the market has intensified this year as insurers look to capitalise on the attractive market conditions following P&C rate increases. In contrast to a year ago, insurers have delivered good results, while inflation has fallen back. Notably, the reinsurance market has stabilised. Rates in that section of the market started to ease during January renewals, a trend that appears to have continued at mid-year, said Turner.

“Without question, carriers are definitely now braver in 2024 following good results in 2023. They all talk a good game about wanting to grow their businesses, but you see it most obviously this year. They are flexing their muscles and offering bigger line sizes, and bigger discounts to get on new business. That is across the board, and more apparent,” he said.

“At current attractive pricing levels, carriers are now looking to fill their boots at the right point in the cycle,” he added.

The return of competition is particularly stark for US cat-exposed property business – notably wind, where capacity was constrained a year ago. However, the improved conditions for buyers could be short lived if current predictions for an active US hurricane season are borne out, said Turner.

Other previously challenging lines have also seen more competition. Pricing for aviation war increased significantly on the back of the Ukraine war and losses in Sudan, but now there are signs of rising competition, according to Turner.

“There are still some difficult subsectors, but for the vast majority of business it is reasonably easy to find sufficient capacity at competitive enough pricing to do a good job for our customers,” he said.

The D&O market shows no signs of hardening, despite almost three years of “significant discounts”, continued Turner. “All the gains made since 2019 to 2021 have been given up over the last three renewals. The feeding frenzy is now on a smaller pot [of premium] than would have been otherwise,” he said.

The cyber market has also seen an increase in insurer appetite over the past 12 months, following a period of rapid hardening in response to ransomware losses. “The market has its challenges around aggregation, ransomware and cyberattacks generally, but the fear factor appears to have been forgotten,” said Turner.

Despite the increased cost of cyber insurance in recent years, and curtailed cover for nation state attacks, demand for cover continues to grow, according to Gallagher. “We see an increasing appetite from customers to purchase a cyber insurance product. In my view, it is still competitively priced, and should be on every risk manager’s wish list,” said Turner.

With increased competition, cyber insurance buyers should be able to secure more limit and get better value for the premium they are paying, Turner said. Carriers are, however, likely to continue to require comprehensive risk questionnaires prior to quote, although technology should reduce this burden over time, he added.