It’s a strange old insurance market at the moment. We’re still in a hard market phase, albeit moderating and in some case possibly even softening. Capacity is widely available for most lines, and terms and conditions are improving in some areas and tightening in others.
For buyers, it is what is known in archaic English as a curate’s egg – meaning good in parts (from a Punch cartoon in the late 19th Century).
There has been talk in recent times of a bifurcated market, in which ‘desirable’ risks (i.e. those with good loss experience, little US exposure – especially nat cat) see moderating rate increases and improved conditions, and less desirable risks face a hardening market in all its glory.
But the market is split in even more ways, it seems, especially on the reinsurance side (with the potential for this to dripfeed into the primary markets) with nat cat property risks in the US and elsewhere seeing big increases but casualty rates seeing flat renewals or modest increases.
As Gallagher Re pointed out recently, US property rates for catastrophe-hit risks were up between 30% and 50% in July, and up between 30% and 40% in Florida. Loss-free cat rates rose between 10% and 35% across the US. In Australia, property cat rates were up between 20% and 30%, and between 40% and 75% for cat-hit business. In the UK, property cat rates rose between 27.5% and 35%, or between 32.5% and 37.5% for risks that have suffered a loss.
But the casualty treaty market remained “straightforward”, with “adequate capacity and flat to moderate rate increases, driven primarily by reinsurer comfort with improvements to underlying portfolios”, said Gallagher.
Capacity, however, does not appear to be an issue for property or casualty, which perhaps holds out some hope that a softening market will be on the horizon. Although factoring in continuing inflation globally (which seems to be taking longer to get on top of than many predicted), the continuing war in Ukraine and unpredictable weather may mean this is some way off yet.
In specialist markets, the news is generally better. The cyber market appears to have calmed down a little from the frenetic price rises of the last few years, although double-digit price increases continue. The D&O market is greatly improved for buyers and competition is largely keeping rate increases at bay.
Indeed, the experience of the D&O market may give a crumb of comfort to commercial insurance buyers that there is a light at the end of the tunnel and the underwriting cycle will begin to turn back in their favour. But what is clear is that this will not be across the board, and we may well see hard and soft (and everything in between) markets developing at the same time in different sectors.