00:03
SPEAKER: Welcome to WTW's Global Marketplace Insights series where our experts bring you the latest risk and insurance perspectives.
0:20
GARRET GAUGHAN: Hi, I'm Garret Gaughan, Head of our Direct and Facultative Global Line of Business and I'm delighted to share with you today our latest property and casualty market update. We're uniquely placed in that we have brokers located across 30 local and international market hubs, trading across 400 markets daily, which gives us unique insight into what's happening now, but also helps us anticipate future market outlook and trends.
00:49
With the possible exception of US casualty, the positive news for our clients is that greater competition has returned to the marketplace, which enables us to create more options and choice for our clients and get better market results.
01:03
Now, as you know, every market is nuanced by line of business, product and territory. I'm delighted now to hand you over to the team who will talk you through in greater detail what they currently are seeing in the marketplace and what to expect before the end of the year.
01:21
KIM RICHARDSON: In North American property, since our last update, we are seeing a much more favorable marketplace for our clients. As the year has progressed, each month has brought more positive news for our clients. We have seen significant growth goals from insurers globally on both new and existing clients.
01:37
The consequence of this has been excess capacity, causing over-subscription, which has brought back our leverage to achieve rate relief or improvement in terms and conditions. Within the next few months, we'll get a very good gauge on the marketplace for 2025. And this is all based on whether this 2024 hurricane season is going to be as active as the experts have been advising.
01:59
If hurricane season remains inactive with no significant storms making landfall, we expect to see the downward trends on rate to continue. However, should the hurricane season play out as the experts predict, we could see the US property marketplace once again look to potentially push rates. But with all the additional capacity in play, will that be the case? Only time will tell.
02:22
As we progress into Q4, we expect to see the trend of increased competition and overcapacity to continue. We also have the added benefit of our market approach, with Bermuda and London teams working as one with our North American brokers. This presents our clients with even further competitive advantage and choice.
02:42
TEMITOPE OMONUBI: The International property market has tipped in the clients' favor. Insurers are making a consistent profit and there is a mandate to grow. This, combined with a number of new entrants both in London and globally, has led to an increase in capacity and consequently an increase in competition.
03:01
The increase in capacity has resulted in an over placement on accounts. And in target occupancies there have been significant over capacity. From a pricing perspective, Natural Catastrophe (Nat Cat) regions and loss heavy accounts are stabilizing to flat if not reducing, whilst more vanilla occupancies or target accounts have experienced a high single digit to double digit rate decrease.
03:26
With the increased competition in the market, we are starting to see more favorable terms and conditions being achieved, such as deductible amendments or removal of difficult conditions, in particular on accounts that have experienced a good loss ratio over the past number of years. There is opportunity if key coverage is needed now to leverage softening pricing to include coverages that were not available in previous years.
03:50
The outlook is definitely positive for clients at this stage. And as the markets globally are in different stages of a cycle, it is a great opportunity to maximize the global markets across our major broking hubs in Miami, Bermuda, London, Dubai, Singapore, Hong Kong, and Shanghai. As the underwriting year comes to an end, we expect to see the trend of increased competition in all territories and aggressive pricing continue into the fourth quarter.
04:21
EMILY ELLIS: Securing alternative competitive lead umbrella and excess liability capacity remains challenging for high hazard and challenged risks, however, this is now showing in low and moderate risk classes as well. Lead umbrella placements, regardless of the industry, are seeing rising costs, higher underlying attachment points and reduced capacity, with few lead 25 million placements remaining.
04:42
Umbrella and excess liability rates continue to increase over the first six months of the year. Markets now have expectations for low double digit increases instead of high single digit increases at the beginning of the year. This high rate environment is expected to persist throughout the remainder of the year, with nuclear verdict trends driven by auto and products liability.
05:03
To counter this, we have launched the first dedicated structured auto liability solution in the marketplace. Our structured auto buffer facility, also referred to as a swing plan, provides an alternative risk financing solution and rewards good risk management and loss performance. The facility will address concerns around capacity and increasingly high premiums in the auto liability space.
05:24
The team has also launched a construction excess liability facility to help facilitate the placement of construction risks, both projects and annual contractor programs. It has been designed to streamline the placement process by bringing together a panel of lead markets and a supporting panel of automatic capacity, thereby enabling brokers to efficiently place a large block of capacity on a single policy form and on a follow form basis.
05:49
EDWARD HUNTER: There has been a marked shift in the international casualty market in the past few months, with strong signs that we have entered a softening market. We are certainly seeing rates dropping and reductions in single territory renewals, specifically Australia and Canada, as domestic carriers have been particularly aggressive with a view to clawing back lost ground over the past number of years.
06:10
However, multinational programs, specifically those with any US touch points, are seeing rates hold due to continuing concern over the impact of social inflation, as well as growing alarm over the status of the 15 to 19 US casualty accident years, which has seen a number of reinsurers having to re-reserve.
06:31
We will continue to track this as well, as the more recent accident years of 2021 to 2023. In addition to rate decreases, we have seen the trend for contracting line sizes, which had proved a feature of the past three to four years of the hardening market, begin to reverse, with certain insurers looking to counter the shortfall in premium due to rate reductions by increasing and committing more capacity.
At the moment, insurers are looking to manage their retentions to protect their portfolios from future inflated claims costs. On the subject of developing risks, we have seen the specter of climate change exclusions creeping into general General Liability (GL) conversations where previously there had be more targeted on natural resources related accounts.
The market is looking to impose Per- and polyfluoroalkyl substances (PFAS) exclusions where they can, although can be more flexible with no US exposure for the time being. So in summary, non-US exposed and well managed single territory accounts are certainly being targeted, and incumbents are beginning to feel the squeeze as competition grows, with insurers posting consistent profit and focusing on top line growth. So we are expecting competition to increase before year end, which will enable our teams to create client options on pricing, capacity, as well as terms and conditions.
07:54
LOUISE DORRIAN: As a niche, non-compulsory line of business, the product recall market generally falls outside of the usual insurance cycle. Our market continues to be competitive, and we found rates to be relatively stable this year, a trend that we do not anticipate will change for the remainder of 2024.
The growth in alternative foods, combined with more stringent regulations and complex supply chains, has resulted in an increase in the frequency and severity of product recalls in the food and drink sector. This has been more apparent in recent months where we have seen several significant losses, often exceeding the limit of indemnity.
With this in mind, we are working closely with clients to continually review their policy limits and retentions to ensure they remain adequate to manage changing risk exposures. We expect these sizeable losses to have an adverse effect on the market in general over the coming months, and have already seen some insurers start to reduce line size. That said, overall capacity is at an all time high.
08:54
Losses aside, the market continues to evolve and remains intent on providing solutions that address the emerging needs of clients. The market has introduced new coverages for alternative foods, such as vegan and free from products, and continues to gain greater comfort on software risks within the automotive sector.
We anticipate this trend to continue and have already seen a number of coverage enhancements come into play following the broadening of coverage from US carriers. We believe there are significant growth opportunities as contractual requirements continue to evolve, with many customers imposing requirements on their suppliers across various industry sectors to purchase product recall insurance. Never has there been a better time for new buyers of recall.
10:01
CHRIS STRONG: The global environmental insurance marketplace is expected to see a period of innovation to ensure a suite of products are available for the rapidly changing regulatory environment. The Environmental Impairment Liability (EIL) market is likely to branch out from solely being pollution-based wordings to broader carbon risk and biodiversity risk based wordings.
Environmental insurance is an increasingly important consideration for risk managers, and our team are well placed to provide a full suite of solutions. We've observed an increase in clients purchasing EIL insurance with a diverse range, including those involved in Mergers and Acquisition (M&A) transactions across Europe, global manufacturing clients and infrastructure projects worldwide.
10:23
Environmental claims can arise from the most unexpected sources, making it really crucial for businesses to assess and manage their environmental risk exposures effectively. We work with clients across a range of industries, including real estate, construction, manufacturing, M&A and natural resources, amongst others.
10:47
Emerging risks that the EIL market is leading on include biodiversity damage and carbon capture losses. Per- and polyfluoroalkyl substances (PFAS) is still a hot topic. But not until reliable quantitative risk assessments of a broad range of PFAS chemicals become possible and regulators have a consistent approach to what levels are deemed unacceptable, it's very difficult to obtain PFAS coverage for pre-existing known events.
11:13
That being said, we are able to obtain sudden accidental pollution coverage for PFAS chemicals. And this is especially useful where there's exclusions in place on general liability policies. Biodiversity risks will become an increasingly critical consideration for businesses as new legislation evolves, requiring them to manage their impacts on biodiversity and also address how their operations may be exposed to biodiversity losses.
11:42
A recently launched product from SCOR covers the cost of biodiversity restoration projects that are destroyed by certain named perils, giving funders more certainty on their investments. Similar biodiversity products will become available in the coming 12 months, so be sure to watch this space.
