How inflation in 2023 is affecting the general insurance market – Momentum update

Over the last three years, following a prolonged soft market cycle, the UK and global insurance markets have experienced a rate correction: COVID-19; the war in Ukraine; natural disasters; and the cost-of-living crisis, have all contributed to shaping the current market conditions.

There is almost a two-tier marketplace. Competition is fierce for the ‘vanilla risks’ (see below target trades), but market capacity is limited and/or seeking rates for high hazard trades with poor protections or non-standard construction. In summary, Property Insurance pricing remained competitive for low to medium hazard industries, whilst less competition exists for the higher hazard trade groups/risks with major loss activity.

Professional Indemnity

• Following the hard market of the last three years, the UK PI market saw signs of stabilising as opposed to softening in the last two quarters of 2022, particularly in the SME sectors for target business.
• New capacity is entering the market. Great American and Royal Sun Alliance are rumoured to be re-entering the Design and Construction sector.
• The competition for Architects, Cladding Contractors, Mortgage Brokers and Independent Financial Advisors remains limited.

Directors and Officers

• We are beginning to see competition in the UK mid-market and large corporate space from new capacity.
• There is a general slowing of rate increase and in some cases, rate reductions.
• The majority of claims under D&O policies remain under the Employment Practices Liability (EPL) tower, insolvencies or regulatory investigations. The increasing frequency of claims in these areas is still prevalent and will continue to drive an upward repricing of risk, compared to only a few years ago. Insurers are looking to increase excesses under the EPL section to £5,000 and £10,000. Some will offer a reduced excess should the insured consult the preferred legal team of the insurer before taking any action against a staff member.

Cyber Insurance

• The market experienced pricing stabilisation following an increase of 102% year-on-year in the first quarter of 2022.
• Strict requirements from insurers regarding key cyber security controls continued to positively change underwriters’ acceptance. We were still seeing premium increases at the end of 2022, along with higher excesses.
• The main focus as alluded to above, is clients improving their first-party controls to deal with attacks on their systems – better perimeter defence such as multi factor authentication (MFA), endpoint detection & response  (EDR)  and increased staff awareness and training.

We will be running a number of webinars during the course of the year which will provide more detail on current market conditions.

If you are due to visit any prospects/existing clients and would like intel prior to this, please contact the broking team who will be more than happy to help. Rest assured that Momentum continue to strengthen market relationships with a number of partner insurers who are looking to grow with us during 2023.