Q4 2023: Global Insurance Market Overview

Pricing was pressured by inflation but remained moderate. Challenged risk profiles and risks with adverse loss experience such as Natural Catastrophe-exposed Property risks and Liability risks with significant U.S exposures experienced more significant price increases.

As established insurers expanded their appetite and new insurers entered markets targeted for growth, well-performing risks experienced healthy competition and abundant capacity. Some risks with challenging profiles or adverse loss experience saw capacity limitations and many sought alternative risk transfer solutions.

While underwriting remained disciplined as respects valuations, risk quantification, and matters related to corporate responsibility, insurers’ year-end growth targets led to more flexibility and client options, particularly for preferred risk types. Robust underwriting information and risk differentiation supported superior renewal outcomes.

Expiring limits were available across most placements. Some insureds sought to reinvest their premium savings in increased limits. Increased limits were often available for well-performing risks and for products experiencing strong insurer appetite for growth (e.g., Cyber and Directors & Officers).

Expiring deductibles were achieved across most placements. Some insureds sought to reinvest their premium savings in deductible decreases. Such decreases were often available for well performing risks and for products experiencing strong insurer appetite for growth (e.g., Cyber and Directors & Officers).

Insurers continued to leverage coverage terms as a differentiator, and coverage enhancements, supported by quality underwriting information, remained available for some risks. Some restrictions (e.g., related to Communicable Disease, Coverage Territory, per-and polyfluoroalkyl substances (PFAS), and Strikes Riot and Civil Commotion) remained effectively non-negotiable.

Insurer appetite and capacity deployment was dampened by claims inflation stemming largely from higher parts and labor costs, increased accident frequency, ongoing supply chain disruptions, and increasing use of costly-to-repair automotive technologies. Underwriting remained disciplined and focused on risk management and overall portfolio sustainability. Risk differentiation, including the use of telematics and other vehicle safety and driver training initiatives, remained important.

Challenged risk profiles, risks with adverse loss experience, and Umbrella and Excess programs with lower Primary attachment points, experienced moderately challenging market conditions including rate increases, underwriting scrutiny, and capacity limitations. Well-performing, in-appetite risks experienced a more growth-focused environment, including some downward price movements. Social inflation and U.S. exposure – and the potential for “nuclear verdicts” – was a key underwriting consideration and cost driver. Underwriters became more conservative in their per-and polyfluoroalkyl substance (PFAS) mandates.

Despite ongoing cyber incidents, buyer friendly market conditions continued, with robust competition and abundant capacity as incumbent insurers sought to retain their renewals and potentially expand their participation, while newer entrants competed aggressively as they sought to develop their Cyber product. Underwriting requirements remained consistent, particularly related to cyber security and other risk management practices. Privacy-related losses remained a key insurer concern, with a specific focus on biometric data and pixel tracking, as well as emerging enforcement of privacy/consumer protection regulations. War and systemic risk also remained a top concern for insurers, and they continued to evaluate, scrutinize, and in some instances restrict coverage offered for critical infrastructure, systemic and/or correlated events, and war. Risk differentiation and evidence of best-in-class security / privacy controls were key to achieving superior renewal results.

Buyer-friendly market conditions continued, driven largely by abundant capacity from new and established insurers combined with a lack of new buyers (IPOs, deSPACs, etc.), as well as insurer focus on achieving year-end growth targets. Many insureds sought to reinvest their premium savings in deductible decreases, limit increases, and wording enhancements, which were available for some risks. Rising event-driven litigation and limit aggregation were key underwriting concerns.

Insurers sought profitable portfolio growth through pricing adequacy, targeted appetite, and disciplined underwriting. Modest-to-moderate rate increases continued for most risks while heavy industry and Natural Catastrophe-exposed or otherwise challenged risks, as well as Sabotage, Terrorism, and Political Violence coverages, experienced a more challenging pricing environment. Insurers remained focused on Natural Catastrophe capacity management; however, overall capacity remained generally sufficient as some insurers sought to expand their participation. Detailed underwriting information – including descriptions of valuation methodologies – and early engagement remained key to achieving superior renewal outcomes.

• Across the region the market has increasingly bifurcated as certain products, locations and segments continued their hardening trend while others – where rates were deemed adequate and insurers were focused on growth – were in a softening cycle.
• Following almost six years of insurer measures to improve profitability, client organizations continued to look at ways to maximize their captive and self-insurance mechanisms while newly growth-focused insurers faced a relevancy challenge with clients now less receptive to risk transfer.
• Throughout the year, insurers had mixed success in passing on the increased costs and higher retentions that were required by their reinsurers in the 2023 treaty renewal cycle. The more orderly 2024 reinsurance renewal cycle that played out in Q4 is expected to allow greater (direct) insurer flexibility into 2024.

• Inflation continued to pressure pricing amidst generally moderate market conditions, although Natural Catastrophe-exposed Property and otherwise challenging risk types, including life science, chemicals, automotive parts, and mining risks, experienced a more challenging market environment.
• Social inflation continued to impact Casualty pricing for risks around the world, but this was most prominent for U.S. exposed risks. Underwriting rigor for U.S. Auto exposures further strengthened as insurers sought to assess and limit their exposure; robust and detailed information was required, and coverage restrictions were mandated.
• Cyber and D&O markets continued their softening trend and market conditions were generally buyer-friendly, characterized by premium reductions and enhanced coverages.
• Auto market conditions were impacted by increasing claims costs. Battery fires and high replacement costs associated with Electric Vehicles were key underwriting concerns.

• A positive economic outlook and expected growth, especially in the Construction and Infrastructure sector, drove insurance market optimism; however, insurers remained cautious related to political and economic risks and instability in some countries.
• Market conditions were moderate overall, characterized by targeted price reductions and sufficient capacity for most risks. Coinsurance was an important lever for risks which experienced limited appetite and capacity.
• Insurers are closely monitoring Property losses following CAT events in the region such as Hurricane Otis in Mexico and hailstorms in Argentina.

• The market continued to moderate as, over the course of 2023, capital slowly returned, inflation eased, and interest rates positively impacted insurer performance. Q4 was characterized by ample capacity across most of the market. Insurers sought to balance growth with profitability, with a stronger emphasis on growth as year-end budget targets approached. There were a growing number of opportunities to simplify client programs, capture savings and generate competition.
• A two-tiered market continued, with targeted and well-performing risks experiencing favorable conditions while challenged risks saw continued price increases (although more moderate than in recent years) and some capacity limitations. Risk differentiation and quality underwriting information enabled clients to take advantage of opportunities in the market.
• Early concerns related to the January 1st treaty renewals faded as the relatively smooth renewal season played out. The rebound in profitability, rebuilding of capital positions and greater availability of retrocession capacity encouraged many reinsurers to display increased appetites.
• Many clients reassessed decisions made during the hard market and increasingly sought innovative approaches and solutions for reducing balance sheet volatility such as captives, Alternative Risk Transfer, and parametric products.