0:03
SPEAKER: Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.
0:21
HUGO WEGBRANS: Good day and welcome to the third quarter 2024 video on the situation in the marketplace. Probably not a lengthy video today as we've got our geographic leaders doing a video on their respective areas in the world. And our global line of business leaders are doing, for their line of business, specific videos in this quarter. The other thing is it seems like a quarter without a lot of change. We went over the summertime and basically what we see is insurers still smiling on it.
0:58
ALASTAIR SWIFT: Hugo, I think you're absolutely right. I mean, there definitely seems to be a positive vibe amongst the insurers. There are the odd exceptions. There always are. But I think in general, it's been a favorable first half of the year that's continued through this quarter. We obviously have seen some, I would say, smaller, whether they're smaller, the billion plus is a different question. But there's still been a little bit of natural catastrophe action out there and that will have a more of an impact on insurers than it might have done in previous market cycles, because insurers are having to take bigger retentions on their own treaties and are passing less through to the reinsurance community. But I'm still not sure we've seen enough activity that in some shape or form, it's going to change the market dynamics that we've seen over the last couple of quarters. So, I think we should expect the trend to continue and..
1:58
HUGO WEGBRANS: We see them [natural catastrophes] a bit more spread out over the world. It's not the obvious places where we used to have seen catastrophes like that. We just had the Austrian one, there's Europe, there's places where new catastrophes are which..
2:15
ALASTAIR SWIFT: And I think this is one of the things that insurers are having to come to terms with now is that, where traditionally you would have seen things from, I don't know, a hurricane hitting Florida or the Caribbean or something along those lines. It's more areas where things would have been thought of as not secondary cap perils, but also secondary cat areas that are all of a sudden experiencing losses and loss dynamics that might not have been seen in the past. So there will be more focus placed on that, and if I was a client, the more data, the more accurate data I can give to insurers, the better because they're going to be even more focused around what those catastrophe models are pinpointing, not just in the traditional areas that we would have thought of Florida or California, et cetera, but also in some of the other areas now where modelling is going to become even more important.
3:11
HUGO WEGBRANS: Yeah, but generally, I mean, look at the investor calls of the major insurers, there's smiles around and sort of there's a change in language of rate increase, remediation. Well, I wouldn't say panic but change of the market into, I mean, the new thing is growth. The new thing is positioning or repositioning, gaining market share. So there's still more willingness to write business. We see around the globe. And there's a number of clients that profit from the larger, well managed clients that come to the market that have received real good results. It's not a real soft market yet, is it?
3:53
ALASTAIR SWIFT: I don't think so, but I think it is a softening market, would be the way I would describe it because there are more lines of business at the moment where there are moderating rates than there are increasing rates. But we shouldn't be unaware that there are still areas and pockets of the market where there's some rating pressures and some rating dynamics. You think of some of the US casualty lines, some of the things that are happening on the motor side of things. Those are still putting some stress into the overall picture. But I think in general, there are more lines of business now where there's moderating ratings and increasing rating, which is a switch, frankly, from where we were even at the beginning of this year.
4:42
HUGO WEGBRANS: Yep, yeah. But it seems like, I mean, we discussed it last quarter is, everyone's seeking for growth, trying to get more. So we see around the globe, a better environment for clients. We still see that, but it's not like the other soft markets where it's really getting off a cliff, let's put it that way.
5:00
ALASTAIR SWIFT: I think there still is a modicum of underwriting discipline. Whether that will continue through the whole year, I haven't got a crystal ball, I can't tell. But I think as we get more and more towards the end of the year, if the loss activity stays at this rate and level it's at the moment, I would anticipate that actually there may be a little quickening of that softening towards the end of the year as people look to achieve those growth budgets, those growth targets that they put into their business. And, it will set 2025 up as a very interesting year across the community as a whole because potentially in previous market cycles, when you've seen this type of activity happen, the next thing is you will see further consolidation of the insurers as they look for growth through acquisition versus through growth of winning new business.
6:06
HUGO WEGBRANS: Yeah, there's still areas. The bigger limits are getting a bit more easy because there's more capacity, as you said. I mean, US casualty, everyone is sort of pulling away from that and we really see some action there. It's not that they're still talking around. There's really action. There's still geopolitical volatility that is out there. So that doesn't help either. So in that sense, that market there is still stable or even increasing if you look at US casualty. The one other thing we see and there's a number of insurers that really get their ESG strategy now in their underwriting, where they're actually measuring clients that come in on carbon emissions and that kind of stuff. So that also takes part of the market away from softening and stabilizing on a global level, I think.
7:01
ALASTAIR SWIFT: Yeah, I think that's right. And I think you're starting to see more insurers also try and come up with additional capacity for what would be considered to be good ESG risks. I'm not sure necessarily that capacity yet is differentiated from the existing capacity, and I'm not sure whether or not it actually serves any purpose for an insurer other than helping them transition their portfolio of business. But certainly you're starting to see more positioning around that and more positioning of capital around that.
7:38
HUGO WEGBRANS: Yeah well, the other thing, and again, I think we said last quarter as well is insurers need to think about where they differentiate themselves from each other because if the product stays the same, the only thing you can differentiate is price. There's not a whole lot of activity in new product or bouncing back on wordings or giving coverages that might be relevant to clients that either have taken away or arisen from certain developments. Is there?
8:08
ALASTAIR SWIFT: I haven't seen a huge amount. What we have started to see is people really looking at how, let's take cyber, they manage events. They manage systemic events. How they create models or the ability to model systemic cyber risks so that they can start deploying capacity as effectively as they possibly can and hopefully some slightly larger limits than have been offered previously. So, there's a lot of work going on around that at the moment across the industry as a whole, which will benefit, I think, clients in that particular area. I think the other thing that the insurers are looking at is also how they access the business and the digital journey that they need to go on themselves as businesses to become more efficient. And so we are seeing a lot more uptake, I think, with insurers on them thinking, OK, how do we change what we do as underwriters, as insurers to try and take out some of the frictional cost base that exists within an insurance company? And frankly, that should be welcomed by clients because as much as it's not product development, it is process development. And if that process development allows them to offer insurance at more competitive terms, that should be welcomed.
9:25
HUGO WEGBRANS: Yep, and I mean, we welcome that as well with our developments with our Broking Platform that we roll out over our thousands of brokers around the globe, working in one system and actually connecting to insurers as well. So that sort of helps the entire value chain. One last thing on some of the things that happened when we've seen sort of Baltimore Bridge, we've seen CrowdStrike coming in, that seems to have a less lasting effect than events that happen before. It looks like there's a standstill especially cyber with CrowdStrike. It sort of went down and with CrowdStrike, it sort of stopped a little bit, but then kicked back quite quickly into the situation from prior to that. That's probably the modelling that you mentioned as well, that people are more aware of what they're writing their books and there's less panic around an event like this.
10:18
ALASTAIR SWIFT: I think it's the modelling. I think there's more availability of reinsurance that there potentially was in the past that reinsurance is potentially less volatile than it was in the past, and that's allowing people to have more consistency of approach and not be as reactionary to losses as they might have been in the past. Which again, good thing for the market, some stability of pricing in there. I also think it goes back to where we started the conversation. You look at the underlying trends for insurers at the moment. They're pretty positive and now's not the time to be pulling out of business. Most of them will want to be leaning in versus leaning out, and will want to be trying to take to grow as much as possible in this environment. So again, if I'm a policyholder, it should be a good time.
11:09
HUGO WEGBRANS: Should be good. I know there’s direct carriers with 90 plus combined ratio. Reinsurers are even below the 90 plus. I mean, that will bring some stability in the market and some, as you say, better deals for clients out there. And still, we keep on ending on that in every quarter. As a client, you should have your data available, do your modelling of your risk, know what you ask from the market and be prepared to seek for the best deal.
11:42
ALASTAIR SWIFT: Yep, I think that's absolutely right. And look, as always, the earlier you get into the market, the more time we have in the market, the more ability we have to prepare insurers, prepare submissions, have those negotiations, the more I'm going to say value we can create for our client base. So yeah, excited around where the market is from a policyholder perspective and looking forward to taking as much advantage of it as our clients as we possibly can.
12:18
HUGO WEGBRANS: And with that, again, please watch the videos of the lines of business leaders, look into their specific areas or into the geography leaders that give a view of their regions in the world to basically get an even more specific picture for your risks and your placements. With that, we want to close our video on the third quarter and we look forward to see you probably early next year. I mean, it's almost there, to talk you through the fourth quarter. Thank you.
12:53
ALASTAIR SWIFT: Thanks a lot.
