Insurance Marketplace Realities 2024 Spring Update – Bermuda

Rate predictions: Bermuda

	Trend	Range
Casualty
Low hazard		Flat to +10%
High hazard or loss impacted		+20%
Property
Non-CAT		Flat to +5%
Distressed or CAT-exposed		+5% to +10%
Financial lines
EPL		Flat to +5%
D&O		-15% to flat
Cyber		-20% to -5%

Casualty

• WTW Bermuda has launched a Bermuda-only construction facility offering $25 million (minimum) to $50 million (maximum) of capacity in excess of the lead, with follow-form of choice of law coverage.
• The injection of an additional $30 million in capacity from two new entrants (offering $15 million in capacity each pending regulatory approvals), is greatly anticipated.
• Nuclear settlements: These large settlements are driving additional rate pressures. Nuclear settlements can happen quickly and are often driven by the twinned fears of reputational harm and social inflation, resulting in higher-than-normal and faster-than-normal settlements.
• Casualty capacity continues to be broadly stable, with only slight capacity retrenchment from some laggard markets (e.g., reductions in deployed limits on towers from $25 million to $20 million or from $10 million to $7.5 million). No Bermuda markets are deploying more capacity on renewals.
• Terms and conditions are stable, although PFAS continues to be an issue. There have been varying degrees of market response, including increased underwriting inquiries, underwriting questionnaires and exclusionary language.

Property

• Underwriting discipline: Underwriters will look to maintain underwriting discipline with continued emphasis on holding terms and conditions. With particular emphasis on:
  • Rate adequacy: Is the risk appropriately priced, can it bear a reduction, or is an increase warranted?
  • Risk selection: While growth is being sought across the board, market share is not a measure of success for all. Profitability and margin remain critical metrics for many.
  • CAT definitions and hours clauses, deductible adequacy and sub-limits
  • Replacement cost valuations: Markets remain focused on declared values despite relatively lower building cost inflation. A robust valuation methodology is usually needed to avoid restrictive policy language, i.e. average or margins clauses.
  • Enforcing cyber and communicable disease exclusionary language
  • Understanding global supply chain issues/CBI exposures.
• Underwriting focuses: Despite an easing of capacity, underwriting bandwidth remains stretched. Quality of submission and clarity of placement strategy are vital in producing favourable outcomes.
  • Demonstrating progress on risk recommendations can be a differentiator with incumbent and new markets.
  • ESG is increasingly part of the underwriting review process.
  • Accurate values are crucial to avoiding coverage restrictions.
  • Underwriters continue to monitor non-traditional losses and their impact on profitability, with particular emphasis on “non-modelled” exposures, i.e. flood, wildfire or hail
• Lastly, although there were no major industry losses in 2023, the steady stream of loss events continues to erode underwriting profitability. It remains to be seen how long underwriters will be able to maintain the discipline of the past few years in what is undoubtedly a more competitive environment than we have seen for several years.

Financial lines

• Competition amongst financial lines placements remains strong. Most established financial lines products, except wage and hour and lawyers E&O, are in softer market conditions. Many factors, including industry and loss history, will determine the extent of rate increases or decreases.
• EPL: Rates are expected to remain stable, particularly for risk profiles without losses. Bermuda's market is witnessing stable capacity, offering $15 million lines ($10 million in some instances) and typical retentions between $1 to $5 million. Additionally, many markets seek separate retentions for class actions, especially in California. Of note is a new entrant adding $5 million in Q1 2024, targeting employers with less than 5,000 employees by offering retentions as low as 250,000 and affirmative punitive damages coverage.
• D&O: The expectation is a continued decreased rate environment into 2024. However, achieving further cuts may be challenging due to incumbents resisting going below their minimum rate adequacy requirements for capital deployment. Insurers have been more willing to expand coverage than give back premiums in this softer rate environment. Several Bermuda insurers are poised to introduce a niche Executive Compensation Clawback Coverage in response to new SEC regulations that create an indemnification challenge for compensation clawback. This product, formerly available only as an endorsement to Side A policies, is set to launch in early Q2 2024.
• Cyber: The market continues to stabilize, driven by competitive efforts among insurers to retain renewals and achieve growth despite potential shifts due to the expanding cyber threat landscape. Material rate reductions, particularly in the excess market, are observed for the second consecutive year. The introduction of CyProtect Bermuda, a new excess follow-form product supported by all 11 traditional cyber markets, targeting large and complex risks and offering DIC fines and penalties coverage.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contacts

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Chris Heinicke

Head of Casualty, Bermuda

email Email phone +1 441 278 0098

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Chris Rafferty

Head of Property, Bermuda

email Email phone +1 441 278 0061

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Tommy Edwards

Head of Financial Lines, Bermuda

email Email phone +1 441 278 0065

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Kirsten Beasley

Head of Office, Bermuda

email Email phone +1 441 278 0099

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