London Market looks to sustainable energy for growth

London Market insurers see sustainable energy as the class of business with the most potential for significant growth, while political violence and terrorism (PVT) and cyber are expected to see the biggest increases in rates, according to Howden’s latest London Market Appetite Survey. Author of the report Paul Cumberland, executive director, Howden Markets Consulting, said: “With the relatively modest rate increase anticipated for next year across the marketplace as a whole, it is tempting to think we are now in a ‘soft market’. However, really it is the rate of rate increase that is slowing and many classes are peaking in terms of rate adequacy.” PVT came out top from an estimated risk-adjusted rate change (RARC) perspective. “Having experienced years of rate decreases, this line of business is going through somewhat of a revival – 2022 was a watershed moment for the PVT market, following the record year of social unrest, and the upheaval caused by the war in Ukraine. Survey respondents now anticipate another year of rate increases, with the average estimated RARC being close to 20%,” said Howden. It added: “New types of cyberattacks, the ambiguity of war exemptions, and debate surrounding what is considered as a ‘political attack’ will likely continue to complicate this line of business, and may create a greater connection between the PVT and cyber market.” The cyber market itself is stabilising for now, according to the broker. It said 2022 saw an average achieved RARC for 2022 close to 50% for cyber business, whereas this year’s survey estimates that rate increases will be closer to 15%, following further capacity entering an already competitive market. It said a reduction in ransomware activity, an improvement in loss ratios, and an increase in capacity are converging to create a more stable environment, but added that there are signs cyber and ransomware attacks are on the rise, and the focus of these attacks is once again shifting to the West, potentially destabilising the market. The survey of 43 insurers (up 13% from 38 in 2022) was conducted in December 2022, and comprises a mixture of Lloyd’s syndicates and company markets. C-Suite respondents indicated the degree to which they plan to grow or contract GWP in 2023 by line of business. In this year’s report, the stand-out class of business was sustainable energy, said Howden. “With energy transition and climate resilience at the top of the industry’s agenda, respondents displayed a bullish appetite for this class, with the majority of insurers planning for double-digit growth, mainly driven by new business, rather than rate, and two additional carriers considering entering the space,” it said. This year’s survey reveals that 80% of insurers plan for growth in sustainable energy, with an average planned GWP growth of 13% across respondents. This year, 35 insurers responded with planned growth of between 15-25%, with two further markets considering entry into this line of business. “While the appetite for this line of business is strong, the expected risk-adjusted rate change is subdued, suggesting that planned growth will be driven primarily by new business. As the most popular line of business, competition for 2023 is set to be fierce, which may put further downward pressure on rates,” said Howden. CAT events continue to squeeze the marketplace and as a result the survey found the appetite for North American property in 2023 remains as muted as it was in the previous year. Rates, however, are expected to increase by an average of 14%, with some carriers even predicting a 30% rise. For US CAT business, respondent appetite is equally as muted, with an average estimated RARC of 50% for 2023. Mark Gregory, CEO of AXIS International, said: “Howden’s London Market Appetite Survey provides valuable insights into current market appetite and sentiment. Findings in the report significantly contribute to our assessment of growth opportunities in the London market and our approach to particular specialist lines of risk, helping us continue to differentiate our propositions to brokers and for clients on a global scale.” The London Market Appetite Survey report compares planned GWP growth to risk-adjusted rate change per product line to assess appetite for new business. “For those classes with growth targets significantly over and above estimated rate increases, a lot of new business will have to be written to satisfy ambitions. The question remains about whether there is sufficient business flowing into London to keep rates positive and appetite satisfied,” said Howden.

London Market looks to sustainable energy for growth

PVT and cyber expected to see biggest rate increases, finds Howden survey

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Related Articles