Market conditions steadied further in 2022, with a continued tapering-off of the rate increases that peaked in Q4 2020. However, the broad softening of the market anticipated by many has not occurred, other than in some lines that saw increases or over-corrections previously, such as directors’ and officers’ liability.
Several factors contributed to what we might describe as this new ’apprehensive equilibrium’, not least the Ukraine crisis, global inflation, energy costs, plus a renewed focus on environmental, social and governance (ESG) and the deterioration of the 2022 loss record. There is additional current uncertainty around the potential effects of a tightening reinsurance market, with new competition entering the market. It remains to be seen if this will have any impact on rating.
Although insurers have demonstrated improved reported underlying earnings, they face considerable volatility from inflation and cost concerns, coupled with commodities and supply chain constraints. Furthermore, higher market interest rates are impacting asset valuations and cost of capital.
There is a definite thirst to re-engage from brokers, clients, and insurers, with in-person meetings helping position clients compellingly to the market.
While the ability to evidence robust ESG standards does not impact how ratings are calculated directly, typically those clients engaging with ESG at an organizational level tend to have an equally proactive approach to the rest of their risk management style. This means insurers are interested in using these indicators to differentiate risk profiles and where they should put their capacity.
We anticipate increases will continue to moderate further during 2023, despite the potential challenges and continued uncertainty.
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