Market conditions 2020 – What lies ahead?

19 June 2020


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.

London skyline


We are starting to see property rating moving forward by 5-10% for straight forward low/medium hazard trades with modest exposures. Overall property pricing in the UK increased by 10% in the first quarter of 2020 with larger accounts experiencing greater price increases than midsize account.

Those risks with high concentrations of value and especially those involving buildings of combustible construction and/or heavy fire load, high pile storage or involving hazardous processes are commanding significantly higher rates.

Alongside this, there is reduced capacity leading to a re-emergence of scheduling and insurers reducing their line sizes. There is once again a focus on risk features such as composite panels and unattended overnight processes. This is brought into even greater focus for cases which do not have adequate protections such as modern and fully maintained sprinkler systems.

Insurers continue to use ever more sophisticated geo-mapping data to control and limit their exposures in areas with an increased risk of flood.

Other contributing factors for hardening property rates include; increased material costs, increased incidence of weather-related events and escape of water losses.


Casualty business continues to present significant challenges to insurers, in particular EL. Insurers are taking robust action on risk selection and rating.  Overall casualty rates have increased for the 3rd consecutive quarter with typical increases in the upper single-digit range.

Insurers are using trade-based data to refine their approach with the most notable increases being seen in medium/high-risk cases, particularly heavy industry, haulage and construction.

A number of insurers are exiting the market and others are reviewing their risk appetites carefully. Heavier hazard EL risks – especially those with a track record of claims – are facing significantly less choice in the market and increasing rates.

Insurers are looking very carefully at the potential for incurred but not reported (IBNR) – claims when pricing business so that premiums are adequate to the cover future payments.

Motor Fleet

Claims inflation is leading to increased rating largely driven by rising repair costs due to more sophisticated vehicle designs and in-car technology. Repair bills rose by 11% in the first half of 2019 (Moody’s)

  • There will be an increased requirement to use peripheral/wholesale markets for risks such as haulage, waste/recycling, courier, taxi and self-drive hire
  • More onerous terms and restricted acceptance criteria for a young driver – drivers aged 17-20 are twice as likely to make a claim and claims costs will be three times higher
  • Cost of accidents caused by uninsured drivers estimated to be £500m annually
  • Other contributing factors include longer life expectancy and increased care costs. Although the rate of injuries at work are reducing costs  are increasing with Ogden discount impacting claims costs

Financial Lines

Directors and Officers

  • Insurers are seeking a minimum of 10% increases on standard Ltd.  renewals with larger increases being applied to PLC. Generally midsize account see smaller increases but we have seen prices increase by around 50-70%
  • In addition to rate insurers are also looking for increased deductibles for employment practices liability coverage and in some cases are looking to step back from any one claim limits to an aggregated basis of coverage
  • The Impact of COVID is already making leisure/travel and tourism cases extremely difficult with some insurers applying blanket insolvency exclusion to sectors.

Professional Indemnity

  • The PI market lost half a dozen insurers since 2018 with no new capacity to take their place.
  • The first quarter of 2020 saw increases of circa 46% in pricing
  • Construction professionals are the hardest hit by this market correction. Architects, contractors, engineers and surveyors to a lesser extent.
  • The norm now appears to be aggregated coverage as opposed to any one claim (AOC) (Clients should be mindful of contractors signed up with requirements for an AOC basis as some of these have set period of 12 years.)

D&O and PI contributing factors include:-

  • Increasingly defence costs
  • An increase in class actions
  • Coverage offered has broadened materially throughout the soft market
  • New and emerging risks
  • Increased regulatory activity and scrutiny

Cargo and Stock Throughput

  • Towards the end of 2019 the cargo market underwent a widespread hardening and a number of key players exiting the market including Aspen, Beazley and Tokio Kiln.
  • Insurers are rating each risk as though they were presented as ‘new’ and not as a renewal.
  • Reduced capacity for stock storage with excess stock placement becoming more common. There is an increased need to focus on the physical security and fire protections when asking insurers to review cases
  • Transit risks require information on incoming versus outgoing shipments, international versus domestic shipments, maximum values per shipment, average shipment values, and last but not least, detailed loss records and details of procedures implemented to mitigate future losses.

What is Momentum doing to help our broker partners?

  • Provide regular updates on market developments and capacity changes
  • Work closely with our insurer partners to ensure they benefit from the strength and size of Momentum’s business and provide a competitive edge on both new and existing business
  • Ensure regular engagement with our insurer partners via video conferencing as well as access to content exclusive for Momentum Broker Solutions partners
  • Access to webinars and training from industry experts so they are best placed for the changing market
  • Provide marketing literature and lead generation support to help them grow their business
  • Actively recruiting additional broking expertise

Being a Momentum broker partner means you have the entire Momentum team at your disposal to help you in navigating the challenges of a changing market and to enable you to benefit from the opportunities this provides. If you want to find out more about what Momentum could do for your broking business please don’t hesitate in getting in touch.