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Welcome to WTW's Global Marketplace Insight series where our experts bring you the latest risk and insurance perspectives.
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Good day everyone and welcome to our third quarter video on the market circumstances and what we see out there for you in the insurance world.
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First of all, I appreciate your views.
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The videos have been watched quite a lot and we appreciate the feedback that you've given and continue doing that.
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We learn from it and want to make these better than we do already.
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This quarter again like we did in the first quarter a broader set of videos.
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So last quarter you had to do it with Swifty and myself giving the overview.
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This quarter again we're looking at every line of business giving a global view on the on their line of business and geography leaders going into the market circumstances in the area that they operate.
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So you get the full view of the entire market again from us in this quarter.
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So when Swifty and I did the second quarter video the results of insurers were not out yet. They clearly are now.
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So we can have a bit of a look at that to give you some context on where the market is heading.
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And what we've seen over the second quarter and the first half year insurer results is that they have been improving further.
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So the average combined ratio which is the technical results of insurers went further down to the low 90s.
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So there is a profit made by the carriers.
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All of them opened up in their analyst calls with that premium is just ahead of the of the lost one as they as they would.
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But the technical results as they've gone in the first half year have shown good improvements on loss ratios.
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And in addition to that we have seen that also the investment yields are coming back coming out of a period with hardly any investment yields over the last couple of years.
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That is starting to get into the numbers as well.
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And also on the reinsurance side we've seen similar developments.
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Reinsurers, as we all know at the end of last year had a big kick in the market to get the premiums up because of poor results.
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What we have seen in the first half year is that they also came down below the 100% mark and actually making a profit on their business.
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So we're looking to be in a good place from a result perspective in the market.
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Not all is good.
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What we see is that personal lines insurers especially in the US being hit quite heavily on the natural catastrophe side actually are so in a worse place in a commercial bit.
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But also there we see the premium increases that have come throughout the last quarters starting to show into the numbers and getting their results back into the healthy space.
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So where does it leave us now in the market?
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Q2 was sort of like tailing off the premium increases that we've seen over a long period and that has been shown into further stabilization in the last quarter.
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So it isn't flat yet.
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There's still increases to be absorbed by our clients.
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But in general, what we see is that it's getting closer to the zero and in some instances even a decreasing trend to premiums.
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Basically, there's four areas that I want to get slightly into in this video to give you an overview of where the problem areas still are with insurers.
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First of all, when it's a recurring theme, it's a natural catastrophe.
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The second is the social inflation.
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We went into that a couple of times already, but that seems to spike, especially now.
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Economic inflation is the third one and the last one is the uncertainty on how the reinsurance market is going to react at the year end, which is coming up quickly.
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So on the catastrophe area, we saw a third quarter that from a US perspective looked pretty good, I would say below average.
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But if you take it on a global scale, we've seen a lot of natural catastrophes around the globe in areas that we haven't seen them for quite a long time.
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And whether it's windstorms or hail or bush fires or drought or heat, it has been around the globe and hit the insurance market as well.
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We're not particularly precise in how it actually gets to the insurers, but it will have an effect on their results and it needs to be seen.
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So catastrophe and there were property catastrophe is one of the areas of concern.
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Second one is the social inflation and what we've seen over the years 2515 to 2020 has been pretty benign.
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But since then and after COVID, when there was sort of a catch up in claims, we've seen especially the nuclear verdicts or the massive verdicts on what we see relatively small events has been huge.
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There's a fault number of big claims getting into the market.
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I almost would invite you to Google the nuclear verdicts and look at a couple of the examples.
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But one of the triggers of that is that the litigation financing that is now available for people that actually get financed to litigate against your insurer is a growing industry.
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And that has led to a number of these vast number of these massive verdicts that get into our market as well.
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The economic inflation seems to tail off a bit, bit less of an issue with most of the carriers still there, but something that we get used to deal with.
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And finally we've got the uncertainty of the reinsurance market and that is a big question to GRMs.
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The messaging we get from the reinsurance market is that there's a need for another round of premium increases.
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Look at the results, that's something that we try to fight hard as we can.
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But the big four reinsurance don't seem to want to grow massively compared to where they are today and to sort of sacrifice results on that.
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So bottom line results on that.
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So again, it looks like stabilizing could be another little go in there.
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So overall, if you look at the market, we see insurers still wanting to grow.
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All the discussions we have with them is we want more of this and get into our appetite and we'll come up with the right answers.
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So going through line by line and property Cat dominated where there's no Cats., there's good deals to be had in the US especially and then focus on a couple of states, California, Florida being the most difficult ones.
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If you look at the homeowners, they get out of the retail market into the ENS market with huge increases.
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On the reinsurance side, we see capacity going up.
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So bigger retentions for the direct markets with which leads to increased volatility.
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So carriers have to deal with that outside of the US a bigger focus on natural catastrophe risk in general again following the events that we've seen over the last quarter or the last half year.
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So it's a bit of a mixed bag in property.
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If you're non Cat you look you look pretty good.
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If you're Cat driven it's still tough to work the market to the right deal.
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On casualty, we still see slight increases especially with the threat of the social inflation accounts in the US where you get motor transportation risks that is remains to be difficult around the globe still I mean stable to to slightly up. On the directors and officers, market continues to be relatively soft although we see a sort of a normalization of the premium decreases.
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So the big ones that we have seen in the last 12 months are starting to sort of tail off a little bit and but we still see prices going down which is the same on other financial lines, single digit premium reductions tO stable on professional indemnity, the M&A products, financial institutions, that's where we see those kinds of developments.
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A bit more of those in cyber. So cyber starts to I wouldn't say soften but getting a bit more relaxed.
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Primary area is where the capacity still is quite scarce.
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If you go excess you get a bit more opportunities and that's shown into premium developments as well.
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So primary is stable, the excess is good deals, good deals to be had out of the market.
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If we look at the marine market the liability lines are again under the pressure of the social inflation are difficult at the whole side and the cargo side is flattening and and pretty stable.
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So I'm on construction with a bit of focus on the on the coverage elements that's where the main focus is.
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But apart from that it's a good market to trade in.
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And finally the aviation lines we go in the old risk area we see stabilizing to slightly down.
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If we go into the war that is still a very tough market to get capacity and that's similar for political violence and terrorism where we still see a hot market and difficulties to get our deals done.
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So the outlook, where does it leave us? Again, a mixed bag, some good, it's all tailing off a little bit into a better place for our clients overall.
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Keep saying insurers continue to want to grow.
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Discussions we have with them is around appetite and how we can sort of get that into in front of them to quote your business.
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Three’s more options apart from the problem areas, but there's more options and a bit more of a relaxed market to trade in.
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So better deals to be had.
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And the good news is compared to really the last years is that there's more of an individual approach to underwriting.
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So individual clients can have a discussion around the key risk and have a negotiation, true negotiation rather than the books being remediated and insurers taking a portfolio stance around that.
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So we believe that the market is getting into a better place.
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We're very much looking forward to track your business into the market in the fourth quarter.
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And again, once that is done, we'll be back on video with you to give you an overview on how that went.
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And as I said at the start, we appreciate your views, we appreciate your feedback.
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So let's keep that coming and looking forward to seeing you in real life when we meet in market meetings or at the next video that will be out after the fourth quarter.
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Thank you.
