Zurich sees disciplined renewal season ahead as challenges remain

The upcoming renewal season is likely to be disciplined, with challenges ahead for the P&C market, according to Zurich Insurance’s chief underwriting officer (CUO) for EMEA.

Speaking to Commercial Risk at the Ferma Forum, CUO Penny Seach said: “Broadly we expect the renewal season to be a disciplined one. Rates have been increasing but there still isn’t a huge amount of margin. With geopolitical pressures, economic inflation, demand surge inflation and regulatory changes, it is still going to be challenging ahead on the property market.”

In particular, she said all indications are that tightening capacity for cat-exposed property risk will lead to a challenging 1 January renewal. “We’ve seen capacity exit out of the cat market and reinsurers are looking to restrict and pull back, especially where they have areas of high concentration,” said the CUO.

Property programmes that are not heavily cat-exposed will probably be a bit more stable, she added.

Seach also said inflation will mean risk managers need to concentrate on insured values at coming renewals. “It is important for us that we understand and anticipate the impact of economic inflation – we are watching this closely to make sure that we are getting the right declared values coming through,” she said.

Seach said the liability market is also concerning Zurich. “There has been a lot of social inflation coming out of the US – the awards are eye-watering in some cases – together with a lot of regulatory changes on the horizon across Europe, more litigation funding etc. Our concern is around how the liability market will shape up in the longer term,” she explained.

“We expect that the market will probably move towards the environment that we see in property, to a co-insurance-type market. Our expectation is that insurers will be pulling back on line size, especially where there is US exposure, which means you will need more insurers to fill a slip,” she added.

We also asked Seach how and when ESG will become a factor in underwriting. “Part of our process on underwriting is understanding our customers and looking at all areas of their business. With ESG there is a lot of information and data available, so it is going deeper, and on the environmental side there is a lot more visibility and transparency,” she said.

“So, ESG is absolutely being embedded in the underwriting process. I don’t think it will be immediate but there will be shifts in coverage as the market matures. ESG considerations are extremely important in the underwriting process but it is more around the shaping of coverage rather than a discount on the premium,” she added.