Swiss market past hardening peak as competition mounts

The Swiss commercial insurance market has peaked and moved into overall stable territory, with some lines now clearly softening, brokers and insurers have told Commercial Risk Europe.

Brokers say there is rising competition and capacity, particularly in areas like D&O, cyber and complex property, as international carriers enter the market and existing players go into commercial growth mode. They expect this trend to continue for the next 12 months, with long-term agreements locking in future premium reductions back in play.

However, Swiss buyers still face some tough risks to transfer, particularly around systemic threats, as new exclusions for war and emerging issues such as PFAS creep in.

Insurers argue that although the market is now stable, there hasn’t been a significant increase in capacity. What has come in tends to be coming from follow markets, they say. This is why insurers report still-limited appetite for many non-standard risks and the ongoing need for complicated insurance towers.

Like other insurance markets across Europe, Swiss carriers took corrective action between 2020 and 2023 in the form of rate rises and changes in risk appetite to improve performance. This was obviously not popular with insurance buyers, but the good news is it seem that things have reached their nadir and are now slowly improving.

“The peak of the hard market cycle is largely behind us,” said Dorian Buono, director Romandie of Commercial Risk Solutions at Aon Switzerland. “Some key carriers have shifted from a conservative approach of reducing their capacities and shares to a more commercial mode. They are now keen to accept new risks and deliver more aggressive quotes to grow their books.”

At the same time, some new international insurers have entered the market, bringing additional capacity, mainly on excess layers so far, according to Buono.

Fellow brokers Andy Ewen and Chris Sutton from McGill and Partners agree that Switzerland is entering a “more competitive phase of the market”. “Increased competition, for companies that exhibit preferred risk profiles and/or with large premium spend, among domestic and international carriers, is driving a more competitive rating environment,” they said.

“Increased and new capacity has entered the (re)insurance market, with carriers seeking to maintain or grow their participations, with some evidence of placements being oversubscribed and lines being signed down. A number of carriers are also seeking to grow their lines on renewals, while there are others who are managing their net retained capacity via way of facultative reinsurance,” the pair added. They said things are particularly improving for buyers in lines as such as D&O, cyber and complex property.

And McGill and partners think this trend is likely to continue for at least the next 12 months for risks where carriers have achieved rating adequacy and are fighting to retain business and grow. It points to the return of long-term agreements locking in future premium reductions for two or three years to back up this prediction.

However, Aon’s notes that some risk and industries remain highly scrutinised by insurers. This is particularly acute for systemic risks, such as cyber, and specific geographies, such as US social inflation. And some new exclusion are emerging, said Buono.

“New exclusions are being introduced by the main markets concerning war, sanctions risks – for Ukraine, Israel, in addition to the traditionally excluded territories – and emerging perils like PFAS, which are a growing issue,” he said.

Insurers paint a similar, if not slightly more subdued, picture of the Swiss market facing their clients. Massimo Luperto, customer and distribution manager for the Swiss Romandie region at HDI Global, said the market is now “relatively stable”.

He said rates have remained “fairly steady” over the past months, with some variations depending on specific lines of coverage. Luperto said capacity is generally sufficient to meet demand through coinsurance and excess layers, but stressed that some lines remain more challenging.

He said there hasn’t been a “significant increase in capacity or entry of new players into the market” over recent months, apart from MGAs and in the SME segment.

Urs Lüthy, head of commercial insurance Switzerland at Zurich Insurance, agrees that the market is stabilising in most areas but is split across lines of business.

“Casualty programs with significant US exposures remain challenging given the litigation environment in the US. The D&O market has returned to pre-hard market levels. Cyber insurance has become more dynamic, with smaller specialist players trying to gain market share, including Lloyd’s syndicates entering the market. From a Swiss perspective, it remains to be seen how stable these capacities will be over time,” he said.

Rudolf Scheller, general representative and vice-president at FM Global Insurance Europe, Switzerland, said property and technical lines are still driven by underwriting discipline. He said any real new capacity for Swiss buyers is being driven by follower markets.

Scheller said there remains limited appetite for non-standard risks, which creates challenges in completing programmes. “Consequently, vertical placements are required, applying non-concurrent terms across the panel. This results in an intensive programme management workload for clients and brokers,” he explained.

For his part, Moreno Bühler, country manager for Switzerland at AXA XL Insurance, thinks the overall Swiss insurance market is in “good shape” despite rapid changes to the global risk landscape over the last few years.

“The insurance market adopted quickly to these changes by showing market efficiencies and absorbing even the most complex risks placed. Of course, prices increased across many lines of businesses in line with loss trends. But the market continued to operate efficiently,” he said.

“Looking into the future, we expect an even more volatile environment where risk landscapes and loss trends are changing at an even higher pace. This is why we recommend doubling down on resilience. It is impossible to predict the future, but one can prepare for unexpected scenarios asking the ‘what if’ question on a continuous basis. Obviously, risk transfer will continue to be one tool in the toolbox, but prevention and preparation is where we can now collectively make a difference,” he added.