Market conditions 2020 – What lies ahead?
19 June 2020
Background
Over the last 15-20 years insurance buyers have enjoyed a soft market cycle largely driven by an oversupply of capacity in the market. This has resulted in reduced premiums and enhanced policy coverage as insurers compete for market share. The prolonged soft market cycle has left insurers unable to absorb an increase in claims frequency and severity.
A combination of a number of factors have impacted both the insurance and reinsurance markets including:-
- high profile fire and weather-related losses in the UK
- an increase in global losses such as the occurrence of major storm events and
- other climate-related events such as the Australian bush fires
- the potential impact of COVID-19 related claims
- a dramatic reduction in investment returns – a major source of revenue for the insurance/reinsurance market
- increasing reinsurance costs because of both global and local events
As a result, Insurers will be focused on rating strength rather than top-line growth with an emphasis on technical underwriting. There will be a greatly reduced appetite in certain areas, an increase in retention requirements and restrictions in cover. Insurers will be more selective, and the quality of risk presentations will be influential in their decision making.
It is, of course, essential that the client’s expectations are managed. With many brokers relying on remote contact and call centres there is a great opportunity to differentiate through service provision. Our relationship with the insurance market and key carriers will enable us to achieve superior pricing and coverage.
Below we focus on the main classes of business, the challenges and trends that we expect to see for the forthcoming period.