0:03
SPEAKER 1: Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.
0:21
RICHARD SCURRELL: 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 include political evacuation, kidnap, piracy, active assailant, terrorism and political violence, accidents and health, and contingency. I'm going to provide some broad observations on the current market conditions for companies using the insurance market to transfer risk.
0:50
We have seen increased incidents and claims activity across the crisis management lines, which have had an impact on the capacity available, premium levels or the terms and conditions offered by insurers across some of our key lines. Starting in the special crime line of business, which includes kidnap, extortion, piracy, and political evacuation, our clients have experienced increased frequency of incidents which have had an impact on market conditions.
1:20
Inflation in claims costs and heightened geopolitical tensions have also impacted the rating environment. For those clients who have experienced increased claims frequency or whose territorial exposures have changed, premiums may have moved upwards from between 5% and 10%. However, this is by no means a market wide shift, and the market remains highly competitive with an abundance of capacity, despite there being only a small number of insurers that write the coverage globally.
1:52
In the absence of claims, threats, or changes in employee numbers and territorial exposure, many policies are renewing on a flat premium basis. In terms of coverage, restrictions may be imposed in respect of travel to or exposure in Russia, Ukraine, and Belarus. This could include territorial exclusions on some policy extensions and or a reduced sublimit being applied.
2:19
While Mexico, Nigeria, and Venezuela continue to be hotspots, we have seen an increase in incidence in South Africa, Ethiopia, Ecuador, and the DRC (Democratic Republic of Congo). Turning to Maritime kidnap, the market is competitive with no scarcity of capacity, despite the attacks by Houthi forces against commercial shipping in the Red Sea and Gulf of Aden. However, we have seen rate increases due to these attacks and the resurfaced threat of Somali piracy against commercial vessels in the Indian Ocean.
2:55
Gulf of Guinea piracy remains a very real and present danger with vessels being attacked and boarded frequently, with crew members being held for ransom onshore on many occasions. The geographic scope of the waters at risk of piracy in West Africa continues to spread both westwards and southwards. Due to the varying threat levels, different rates continue to apply for transits of the Indian Ocean and Gulf of Aden versus transits of and port calls into the Gulf of Guinea.
3:27
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 100 plus insurers underwriting this class of business globally. Coverage has remained consistent across the core segments of corporate, health, and sports.
3:48
In respect of event cancellation insurance, there continues to be challenges caused by heightened adverse weather conditions, terrorism, riots, strikes, and civil commotion. Following the largest financial loss the contingency market suffered due to COVID, the market has hardened with higher rates and more restrictive cover. Communicable disease, cyber, and other such exclusions being implemented with reinsurers and insurers attempting to exclude any known systemic exposure.
4:21
However, there has recently been some softening in certain subclasses of cancellation business, such as trade shows, exhibitions, and certain non-cat exposed sporting events. Festival business remains a tough market with limited appetite from insurers due to consistent losses throughout the years and with a substantial portion of smaller festival organizers not having the profit margin to pay the higher rating that is required.
4:48
It is a challenge to get the capacity required on some of the larger festivals at a price the client is willing to pay. Turning to terrorism and political violence, 2024 year-to-date loss activity remains relatively low following insurers having rebalanced their portfolios after the dramatically increased loss activity in prior years due to civil unrest in Latin America, Hong Kong, and South Africa, alongside the war in Ukraine.
5:18
The conflict in Israel and Gaza and other regional escalation still has the potential to result in significant market dislocation, especially for political violence insurers closely aligned with large marine war portfolios. Multiple geopolitical and socioeconomic concerns are on the risk radar for insurers. Taiwan cross-strait relations, potential global or regional recessions, global energy crises, the upcoming US elections, and an increasing social inequality gap, to name but a few.
5:54
If we look at capacity, market capacity has increased with new entrants coming into the market-- Everest, Aviva, and MCI along with some company markets and MGAs. However, most markets continue to deploy and manage cautious line sizes for high-risk territories, heavily aggregated locations, and for policies with wider political violence perils.
6:20
Insurers continue to review 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 treaty renewal season. Discussions in Monte Carlo will likely set the theme on expectations from 01/01 2025.
6:44
In terms of coverage scope, reduced appetite for denial of access, contingent business interruption, and automatic or miscellaneous coverage extensions continue as insurers push to improve exposure monitoring, strongly driven by treaty restrictions imposed on them and which continue throughout 2024. Specific business interruption waiting periods are returning, as well as increased deductibles in volatile territories and higher risk occupancies. Insurers continue to push direct, indirect, or blanket territorial exclusions for Russia, Belarus, Ukraine and Moldova. However, now restricted to wherever applicable.
7:29
And now to pricing. Insurers are still attempting to push some rate. However, a selective approach driven by available capacity and individual risk appetite and perception. This is being balanced and managed with brokers setting the expectation and effectively overlaying their market knowledge on the competitive landscape to manage and achieve the best possible outcome for clients.
7:55
Many renewals after the initial 2022 and early 2023 hardening are seeing lower increases than prior year with market competition and insurer retention goals, helping drive this. The repricing focus remains on minimum rate requirements for capacity and aggregate exposures, especially on excess political violence layers where pricing has mostly been corrected by now.
8:21
The potential for reactive pricing throughout the year remains high due to the varied and ever-changing security risk environment. Pricing reaction to conflicts in the Middle East, currently localized but with possible escalation engulfing a wider region in the future, could reverse improvements in rate hardening, reigniting larger rate increases globally, especially policies with political violence coverage.
8:50
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. There is no shortage of capacity with more than 20 insurers writing the coverage, whether as a lead or following market.
9:17
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 incidents. Premium increases are in the range of 2.5% to 10% where liability coverage is excluded, increasing up to 20% if liability coverage is included. The terms and conditions continue to evolve as insurers better understand the nature of losses, but we are starting to see some insurers withdraw liability cover in its entirety.
9:56
I hope this has given you some insight into the market dynamics across the crisis management lines of business. Our specialist teams use enhanced analytics, risk advisory context, and market expertise in order to navigate these challenging conditions and deliver for our clients. If you think we can help you, please don't hesitate to get in touch and speak with one of the team. Thank you for listening and enjoy the rest of your day.
