0:20
Hello and welcome to this update from Crisis Management, which provides a general overview of the key developments and state of play across our lines of business, which includes the current hot topics of political evacuation, kidnapping, piracy, active assailant, terrorism and political violence, as well as accident and health.
0:40
I'm going to provide some broad observations on the current market conditions for companies that are using the insurance market to transfer their risk.
0:48
We've seen increased incidents and claims activity across all the Crisis Management lines of business, which have therefore had an impact on the capacity available, premium levels or the terms and conditions offered by insurers.
1:01
Starting in the special crime lines of business, which includes that kidnapping, piracy and political evacuation, our clients have experienced increased frequency of incidents which have had an impact on market conditions.
1:13
Inflation in claims costs and heightened geopolitical tensions have also impacted the rating environment.
1:20
For those clients who've had experienced increased claims frequency or those whose territorial exposures may have changed, premiums may have moved upwards from between 5 and 15%.
1:31
However, this is by no means a market wide shift and the market remains highly competitive with an abundance of capacity despite there only being a very small number of insurers that write the coverage globally.
1:43
In the absence of claims, threats or changes in employee numbers, many policies are renewing on a flat premium basis.
1:51
In terms of coveragerestrictions may be imposed in respect of travel to or exposure in Russia, Ukraine and Belarus.
2:00
This could include territorial exclusions on some policy extensions such as the emergency political repatriation and or a sub limit being applied in respect of ransom or loss of ransom and additional expenses in the event of a kidnap or detention in these countries.
2:16
In recent months there have been instances of insurers trying to impose coverage restrictions in Israel, although this seems to have been a short-term response to the 7th of October attacks last year.
2:27
Turning to maritime kidnapping or piracy specifically, the market is similarly competitive with no scarcity of capacity despite the attacks by Houthi forces against commercial shipping and vessels transiting through the Red Sea and the Gulf of Aden.
2:42
However, we have seen significant rate increases due to these attacks and also due to the resurface threat of Somali piracy with the hijacking of fishing vessels, dhows and bulk carriers, and a spate of sustained attempts to seize other commercial vessels in the Indian Ocean.
2:59
Gulf of Guinea piracy remains a real and present danger with vessels being attacked and boarded frequently with crew members being kidnapped and held for ransom on shore on many occasions.
3:10
The geographic scope of the waters at risk of piracy in West Africa continues to spread both westward and southward.
3:18
Due to the varying threat levels, different rates continue to apply for transits of the Indian Ocean and the Gulf of Aden versus transits of and port calls in to the Gulf of Guinea.
3:30
Keeping with the theme of our people risk lines of business and the accident and health marketplace, there remains an abundance of capacity across the industry with over 100 insurers underwriting this class globally.
3:41
Coverage has remained consistent across the core segments of corporate health and sports, but in respect of contingency, there continues to be challenge caused by riots, strikes and civil commotion, communicable disease and mental health restrictions.
3:56
In addition to the legacy financial impact caused by the pandemic, there remains policy limit restrictions and reduced appetite for particular segments of the business including businesses travelling to or from Ukraine, Israel and Gaza.
4:11
Cancellation or postponement and abandonment for outdoor festivals remains challenging and short-term income protection.
4:19
One of the key factors for our clients across all people risk lines is quality, scope and cost of the support that clients will get in the event of an incident, either emergency medical providers or crisis responders.
4:32
The evaluation of these providers, a very important part of our risk advisory role and our robust assessment process is led by our Alert:24 team.
4:41
It drives client decision making and is in particularly sharp focus given the current geopolitical environment and the potential for claims costs to lead to increased premiums.
4:53
Turning to terrorism and political violence, while 2023 loss ratios were relatively low, insurers are still rebalancing their portfolios after the dramatically increased loss activity from prior years, including civil unrest in Latin America, Hong Kong and South Africa, and alongside the war in Ukraine, they are affecting multiple correlating war and political classes.
5:16
Looking to the last six months, the conflict in Israel and Gaza and other regional escalation could result in significant market dislocation, especially for political violence in insurers closely aligned with large marine war portfolios.
5:31
Concerns remain for increased protests, uprising or violent attacks in several countries as half of the world's population votes in elections in 2024.
5:41
Multiple geopolitical and socio-economic concerns are on the risk radar for insurers.
5:46
Taiwan, Cross-Strait relations, potential global or regional recessions and the global energy crisis as well as increasing social inequality gap to name but a few. Insurers are still trying to manage the dramatically increased cost of treaty protections in January 2023 with further low double digit increases in 2024, despite increased retentions and more coverage restrictions.
6:11
If we look at capacity, overall theoretical market capacity has not dramatically changed post those treaty renewals, but reductions in line sized deployment on individual risks have.
6:23
On average 40% more insurers were required throughout 2023 to complete the same placement from previous years.
6:31
This is especially true in high- risk territories, heavily aggregated locations and for policies with wider political violence perils.
6:40
Insurers are reviewing aggregation models for strikes, riots and civil commotion due to recent events and this is coupled with reduced aggregate availability and greater per city retentions following the renewal treaty season.
6:54
However, some insurers were able to expand their 2024 treaty renewals to get back some level of multi city protection.
7:02
MGAs with automatic rating and binding remain limited as insurers take back full control of their exposures.
7:10
We've seen one market withdrawal for the terrorism and political violence market in November 2023, but there are two new markets shortly to enter it. In terms of coverage scope, reduced appetite for denial of access, contingent business interruption and automatic or miscellaneous cover extensions continue as insurers push to improve exposure monitoring strongly driven by those treaty restrictions imposed on them and continuing into 2024. Specific business interruption waiting periods are returning as well as increasing deductibles in volatile territories and higher risk occupancies.
7:48
Insurers continue to push direct, indirect and blanket territorial exclusions for Russia, Belarus, Ukraine and Moldova.
7:56
However, now restricted to wherever applicable. Valuations require inflationary considerations.
8:04
Policies without margin clauses and incorrect declaration penalties are under increased scrutiny.
8:11
Some insurers are considering automatic termination clauses on certain risks due to escalation of events in the Middle East and appetite for multi -year agreements are limited.
8:25
And now to pricing, insurers continue to push for some rate as they attempt to rebalance their books against increasing losses and treaty costs but attempting to balance this over a multi-year period rather than a sudden sharp increase as we saw in their 2023 treaties.
8:40
The repricing focus remains on minimum rate requirements for capacity and aggregate exposures, especially on excess political violence layers.
8:50
Many renewals after the initial 2022 and early 2023 hardening are seeing lower increases now than the prior year with market competition and insurer retention goals helping to drive this.
9:03
The potential for reactive pricing throughout the year remains very high due to varied and ever-changing security risk environment.
9:10
But equally there may also be some reductions later in the year if current countries of concern do not see major incidents or unrest after elections.
9:20
Pricing reaction to conflicts in the Middle East currently localized but with possible escalation in the future could reverse improvements in rate hardening, reigniting larger rate increases globally, especially with that political violence coverage.
9:39
Moving away from terrorism or political violence, active assailant insurance is a relatively new product which is designed to support clients in the event of an active shooter or other attack using vehicles, knives or bombs against their locations and people.
9:51
There's no shortage of capacity with more than 20 insurers writing the coverage, whether as a lead or a follow market.
9:57
Active assailant rates are generally unaffected by the wider hardening in the political violence market, but they are hardening in response to the change in the risk environment in which there continues to be an overall increase in the number of mass shooting incidents.
10:12
Premium increases are in the range of 5 to 15% where liability coverage is excluded, increasing to up to 40% if liability cover is included.
10:23
The terms and conditions continue to evolve as insurers better understand the nature of losses, but we are starting to see some insurers withdrawing liability cover in its entirety.
10:35
I hope this has given you some insight into the market dynamics across the Crisis Management lines of business.
10:40
Our specialist teams use enhanced analytic tools, risk advisory context and market expertise in order to navigate these challenging conditions and deliver for our clients.
10:50
If you think we can help, please don't hesitate to get in touch and speak to one of our team.
10:55
Thank you very much for listening and have a good day.
