Capacity flowing into Spanish market

Insurance companies have a growing appetite for Spanish risk, with new entrants joining existing players, offering more and more capacity in the country while expanding local teams, brokers have told Commercial Risk. But the new willingness to take on Spanish risk has not yet seen local units from global insurers given the power to make decisions about larger policies, a problem that arose in the hard market. “In general, Spain tends to be among the first countries [in Europe] where insurers allocate capacity, and we celebrate that as good news,” said Paloma Migoya, the head of carrier management at WTW in Madrid. “Sometimes we even ask ourselves, will there be enough business for everybody?” Brokers say that the likes of Mitsui, Everest, Sompo, Starr and Arch have either entered the Spanish market or increased their appetite for Spanish risk in recent months. Munich Re is also about to get into the primary market, according to sources. Insurers that previously only offered excess capacity are now eager to get into primary layers. Northern European insurers are trying to get into segments such as offering protection for government bodies, the sources say. “As of today, for new players, Spain is an attractive market, and they are making big investments to set up strong, although expensive, local teams,” said Ana de Gregorio, the head of industrials and services at Concentra, a Madrid-based broker focused on the middle market. However, she noted that the new arrivals are usually not yet ready to offer lead capacity to programmes with more than one insurer. Only a few newcomers, such as Berkshire Hathaway, have already taken this step. Brokers say that before 2019, the market in Spain was even softer than other European jurisdictions. Competition was so fierce that risks could be placed without a proper risk assessment, and deductibles tended to be very low, De Gregorio pointed out. But the hard market changed all that. High deductibles and extreme market discipline have driven Spanish buyers to enhance their risk management capabilities. As a result, margins are more favourable for insurers, while the quality of risk placed by Spanish companies has improved. And, even though underwriting talent has become more expensive in Spain, wages still lag other European markets. The good news for Spanish insurance buyers is that all of this is making Spain an attractive market for carriers. Cristina de Uriarte, head of financial lines at Concentra, said that insurers have made important investments in their Spanish teams, and now need to deliver growth in order to make this pay off. “Insurers have nabbed teams from each other, as there is not much new underwriting talent here,” she said. “There has been much investment, and now insurers have to fill up their business portfolios.” The outcome has been an aggressive fight for new business, especially in financial lines. De Uriarte said that the situation is getting “a bit wild” as insurers fight for business. The fact that the Spanish market is concentrated on large and small accounts, with not as many middle-market buyers as in other countries, has helped to boost competition too. “We try to focus on the continuity [of relationships] without getting into this battle that, in the long run, will not take the market to a good place,” said De Uriarte. De Uriarte pointed out that insurers are calling brokers to offer new capacity for financial lines risks on a weekly basis. Some tricky placements, such as crypto-lending activities, may have to be done in London or Germany, but, as a rule, there is plenty of local capacity in the Spanish market for all kinds of risks, including cyber and financial institutions. However, market stabilisation has not yet brought more decision power back to the Spanish units of global insurers. De Uriarte said that for covers that breach the €10m to €15m threshold, local teams will have to at least get an opinion from their bosses abroad. And some sectors continue to struggle to get capacity due to the particularities of their industries. De Gregorio stressed that the Spanish food industry, which plays a large role in the economy, is a case in point. It is often necessary to find excess capacity in London for such risks, she added. “Even then, a few food companies have to operate without insurance right now,” added the broker.

Capacity flowing into Spanish market

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