Renewals and market conditions

• Underwriters have been maintaining their requirements for pricing increases, with continued focus on underwriting performance rather than income growth. Underwriters are generally seeking rate increases of between 7.5% - 12.5% on loss-free, flat exposure renewals. Policyholders that took the biggest advantage of the softer market conditions face increased scrutiny on rate adequacy when their respective programmes renew. 
  
  
• Throughout the first half of 2020 we have seen a number of marine losses affect the liability market, which is contributing to the continued upward pressure on rates. Underwriters are currently going through business planning for 2021 both internally and with Lloyd’s, reviewing their current position and setting their intentions for the coming year, including sustained rate rises and focus on risk appetite. 
  
  
• These conditions have also led to stricter parameters around new business appetite and a more selective approach arising out of the comparison of rate adequacy between individual placements and across classes. This is compounded by increased management oversight, use of actuaries as well as peer review, and delegated underwriting authority teams having an increasingly influential role in what business is acceptable.
   
• The current market environment means that in order to obtain the best terms we are widely canvassing the market and keeping in regular touch with underwriters to determine risk appetites. The earlier we can engage with markets and with more complete risk information the greater likelihood of a successful conclusion.
  
  
• We are still trying to understand the effect of Covid-19 on both the maritime and insurance industries and how exposure, premium and claims will impact the marine liability class during 2020. Early indications show that there may be potential for a higher level of lower value claims, rather than a number of significant losses. We will be watching closely to see how this develops over the whole of 2020 and whether there is a potential offset of the increased claims cost for Covid-19 related incidents against a reduction in resultant exposure, activity and therefore claims from other causes.
  
  
• Coronavirus exclusions are currently being included on direct marine liability placements. Most markets require the standard market Coronavirus exclusion (LMA 5395) on every piece of new or renewal business, regardless of whether it is relevant to the exposure under the policy. Over the next few months we expect the market to reach a consensus around the use of this exclusion and also wider Communicable Disease / Pandemic exclusions. 

Market capacity

There has been limited movement in available capacity within the Marine Liability market.

In June, Enstar announced that StarStone International and its operating companies would cease writing new and renewal business. This means that Lloyd’s Syndicate 1301, StarStone Insurance SE and StarStone Insurance Bermuda were placed into immediate run-off. StarStone U.S. remains operational, following a recapitalisation with new investors.

As rates are hardening, there is speculation about investment into the insurance industry and new entrants, however, it is too early to tell what classes may be targeted and the effect this may have on the current market conditions.