Rates for technology, media and telecoms (TMT) businesses are unlikely to drop any time soon, with conditions driven by a “lasting underwriting discipline unheard of in previous hard markets”, according to a new sector report by Willis Towers Watson (WTW).
“Underwriting discipline is back with a vengeance,” WTW says, adding that “to make matters worse, insurance underwriters are inundated with submissions”.
The report stresses that TMT buyers need to “stand out” from the crowd with quality submissions and quality risk. “Getting to the top of the pile in terms of securing the best coverage and pricing is going to become increasingly challenging. Insureds will have to demonstrate that they are a compelling risk and that they have proactive risk management in place,” says WTW.
It adds that double-digit premium rate increases have pushed through for several consecutive years for property, financial lines, umbrella and cyber coverages bought by TMT companies. More difficult risks have recorded triple-digit rate increases, with a two-tier marketplace expected to continue in 2021, WTW adds.
The brokers says that “good” TMT risks will be met by more capacity and potentially an easing of premium rate increases, but second-tier risks face another difficult year of renewals with double-digit rate increases and tight capacity. WTW says specialty lines, such as technology errors and omission, will prove particularly challenging.
“Hard pricing conditions will persist for most TMT companies because there are still fundamental issues plaguing the market… In 2021, we expect the continuation of a two-tiered marketplace,” commented Jennifer Sheridan, WTW’s TMT broking leader.
The report goes on to say that Covid-19 will have a lasting impact on how businesses model and mitigate risk to be better prepared for the next crisis.
“Covid-19 and its disruptive impact on business will accelerate corporate resilience efforts,” WTW says, adding that resilience has a greater sense of urgency that businesses will now have to embed across their culture and operations. “We therefore expect to see new efforts by TMT companies, that are also leaders in their field, to continue to build genuine resilience into business strategies and operations in 2021 and beyond,” the broker says.
In this post-pandemic phase, TMT businesses should update their business impact analysis and increase supply chain resilience, WTW advises. TMT buyers should also review risk finance strategies to identify total cost of risk savings, and be able to demonstrate to insurers a deep understanding of risk exposures and mitigation.
“New challenges and risks will unfold when the world emerges from its post-Covid-19 hibernation that, if not managed correctly, could threaten the very resilience and long-term profitability of the business,” WTW says. “Having sound risk management is paramount to an organisation’s success and survival. It is not about generic risk anymore,” it adds.