‘Grave’ market dissatisfaction as growing number of Airmic members fail to get cover

A new Airmic member survey reveals “grave” dissatisfaction with the hardening insurance market as buyers increasingly fail to get cover, capacity shrinks, exclusions grow and there is mounting frustration over poor or late communication from insurers. Airmic’s Q3 Pulse Survey published on the opening day of Airmic Fest, the association’s virtual conference, also found some huge rate rises, with one fifth of respondents reporting D&O increases of more than 400%. The poll was conducted during the summer and reveals members’ views on what Airmic describes as the “harsh market” and a “near perfect storm of conditions that have created a challenging environment for commercial insurance buyers and risk managers”. It follows a similar survey in the first quarter of this year and confirms higher rates, more exclusions and tighter terms and conditions. Some 96% of respondents said they had suffered higher rates in the latest survey and 85% reduced capacity, with things getting worse. Meanwhile, two thirds reported growing exclusions in the Q3 survey, compared to 48.1% in Q1. Some 85% citing reduced capacity, versus 72.2% in the first quarter. But even more worryingly for buyers, 41.7% said cover has become unavailable, up from 22.2% in Q1. And Airmic members are growing increasingly frustrated by poor and late communication from insurance partners – rising from 42.6% in Q1 to 66.7% in the latest poll. Airmic said this “running theme” is perhaps the most “disappointing finding for insurance partners that pride themselves on relationships”. The association added that rate rises reported in the survey are unsurprising, but their scale is “nonetheless dramatic”. D&O cover saw the most dramatic jump, with a fifth of respondents experiencing increases of more than 400%. A majority experienced D&O rises of at least 50%, while almost 30% said prices had doubled. Most members reported professional indemnity and crime and fidelity rate rises of between 20% and 50%. The majority saw property and casualty increases of up to 20%. “The commercial non-life insurance market has hardened and continues to harden. Rates have risen exponentially, in many cases regardless of a clear claims history and proactive risk management. Limits have been lowered and deductibles raised. Terms have tightened, and risks and sectors have been targeted with limitations and exclusions – all as organisations grapple with the coronavirus crisis and economic downturn,” states Airmic in the Pulse Survey results. At a press conference to kick off Airmic Fest, the association’s CEO said the research shows “grave dissatisfaction with market behaviour”. “It is more than just a hike in price and the limits you get in a hard market, although D&O rate rises of over 400% are eyewatering and certainly need justifying. The concern is more about late communication from partners in the tripartite relationship and improper exclusions coming in, particularly into D&O where Covid-19 is often excluded,” said Mr Ludlow. “The problems are widespread and likely to get worse as the economic depression sets in, which is surely to come,” he warned. Mr Ludlow encouraged everybody to come together, rebuild damaged trust and find solutions to the problems faced by Airmic members. “The solutions are not yesterday’s solutions, they must be tomorrow’s. We need to work together to sort out what data needs to be collected and shared, so that insurers can better understand the exposure they are underwriting. But that must lead to differential pricing,” he said. Dissatisfaction in the “harsh market” is already promoting increased focus on alternative risk transfer (ART) – captives, parametric triggers and capital markets – as opposed to traditional insurance. A third of respondents to the Pulse Survey said they are now exploring ART. Exactly half said their organisation already operates one or more captive, and 20.7% have undertaken a complete overhaul or review of their risk financing and captive strategy. Another 20% are considering setting up a captive. The research also shows how the hard market is changing the way organisations utilise their captives. Some 31% are writing new lines of business, with 37.9% using captives for increased retentions. About a quarter (27.6%) are using their captive to explore alternative reinsurance markets and insurance-linked securities. The survey also found that 13.8% of captive owners surveyed have expanded their use of quota shares or co-insurance structures. Airmic members are also preparing to change their approach to renewal in the second half of this year. Some 73.3% said they would seek to begin the renewals process earlier and 70% wanted to provide more data and information to insurance partners.

‘Grave’ market dissatisfaction as growing number of Airmic members fail to get cover

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