2023 saw a challenging property market in the US, with domestic carriers charging significant rate increases, slashing capacity, and restricting coverage. Meanwhile in London, the cargo market was becoming more competitive on both renewals and new business. How was the year for you?

MICHAEL PRENDEVILLE – NAVIUM: War, recession and climate change all added to uncertainty. Despite all of these headwinds, 2023 was a year of relative stability. Both underwriters and brokers enjoyed strong growth from new and returning business to the market, with limited large loss events compared to prior years. This follows reduced attritional losses as a result of increased retention levels thanks to remediation efforts over the past few years. 

The increased capacity has allowed some clients to replenish excess layers that were not achievable over the past couple of years. However, this new capacity has not shifted overall market stability, with underwriters still acutely aware of pressures from inflation, political uncertainty and natural catastrophes. 

2023 did see a notable return to business travel, with clients, underwriters and brokers working closely to further develop relationships both in London and globally.

CHRISTOPHER HICKS – LIBERTY: While the market has grown more competitive, this is relative and the challenges faced by cargo stock throughput underwriters are no different from property underwriters. Both markets are suffering with an increase in prevalence and severity of 2nd tier catastrophe losses such as tornado, flood and wildfire. These are much more difficult to model than traditional perils. 

The impact of both financial and physical inflation also means that any losses are more severe than in the past. In addition, cargo insurers are having to contend with increasing geo-political instability impacting on cargoes and trade routes.

Fortunately, some of the London market changes of 2019 – 2020 have increased robustness. For example, the reduction in vertical limits, the increased use of coinsurance and reduced capacity deployment.

HELEN STEADMAN – AXIS: I agree that this has been a year of transition. 2023 saw more competition in London from both new capacity and domestic carriers, as well as greater churn of business among brokers. This was largely a result of the corrective action that insurers took during the decile 10 remediation years. 

For our team at AXIS, it’s been all about price adequacy. Whilst we saw some pressure on rating, we chose to retain those risks that we felt were core to our portfolio, but we were also willing to part company on risks that we felt were under-priced.

ALEX O’BRIEN – CHUBB: For us, 2023 felt like a slow end to the positive rate environment of the cargo market that has persisted since 2018. As Michael pointed out, there remained plenty of geopolitical issues to keep cargo underwriters on their toes. That said, the return of new capacity, whether through MGAs, new syndicates, lineslips or blind-follow offerings from brokers has accelerated. 

OLIVER LOMBARD, MILLER INSURANCE: In our experience, 2023 was a strong year for the market. We saw more and more businesses come back to the London Market and more stable renewals. This was despite the significant headwinds which you all mentioned, as well as difficulties in modelling second tier catastrophe losses, which are increasing.

We’ve also witnessed the effect of the new capacity after the hard years of corrective actions, and existing markets wanting to increase their market share. London is now offering more creative solutions to distressed or challenging interests. 

Some US intermediaries are still unfamiliar with stock throughput (STP) as a product and how it can complement property packages and its various advantages. What do you see as the key benefits of an STP programme written in the London market? 

CHRISTOPHER: For me the key advantage is its flexibility to wrap around an assured’s supply chain wherever they need it to. STP allows a client to pick the parts of coverage they need and either protect the rest on a DIC basis or not at all. Clients can eliminate gaps in coverage which might otherwise arise, for example when a conveyance arrives at a location. 

HELEN: I think the key benefits are threefold. First, it means additional CAT capacity alongside the property programme. Secondly, there are traditionally lower CAT deductibles than the property market. And finally cradle-to-grave coverage, so there’s no dispute over where the loss would fall.

MICHAEL: As Helen points out, STP delivers continuity of coverage throughout the process. The claims process is simplified as there’s no argument about where claims might fall. It also offers access to the cargo market – there are separate CAT limits for the property and for the stock when the two are split out. In addition, there are often lower deductibles then are being offered on the property programme. 

ALEX: I think the others have covered all the main points. As a joined-up product providing extensive coverage all the way through the supply-chain, matched with London’s strong reputation for claims service, I think STP can be summed up in in one phrase: peace of mind. 

OLIVER: The CAT appetite that Helen highlighted and comprehensive yet flexible cover that Chris mentioned are both significant benefits for us. Another key advantage of STP is increased marketing options by having access to both property and marine carriers. These are two distinct markets and by splitting inventory from property values, it lowers the overall limits required on the property policy, so less capacity is needed. This can be especially useful on challenging property placement.

One of London’s historic strengths has been the face-to-face trading that enables clear and efficient dialogue between brokers and underwriters. How do you find the hybrid approach and how valuable is it seeing brokers in person rather than remotely?

HELEN: The AXIS Marine Cargo team is one of the larger teams in the London market, so we have embraced the hybrid working model by always providing a face-to-face personal service, whilst allowing team members to balance this with working from home more focused or administrative work. In-person negotiation remains integral to the bespoke nature of what we do.

CHRISTOPHER: Insurance is still an industry based on trust between all parties in the distribution chain and I agree that face-to-face is the best way to build this. That’s particularly true for large and complex risks, as it allows brokers maximum opportunity to explain to their client how it differs from other risks. But the pandemic and changes in working patterns have shown many more routine tasks can be done adequately remotely.

ALEX: I feel that an underwriter needs to be told by a broker when they think an underwriter is wrong – and this is far more effective when done in person. As such, we keep a presence at Lloyd’s from Monday through to Thursday to ensure we are there to work constructively with our broking colleagues. 

MICHAEL: The face-to-face element is a vital advantage over other markets. The recent shift to transacting through various platforms should thus be about facilitating face-to-face transacting, not replacing it. However, a hybrid approach has undoubtedly increased efficiency. Performing some tasks remotely streamlines the process.

At Navium, we’ve provided a physical presence in our office every weekday. Brokers are increasingly returning to the office for more days a week – this also promotes collaboration and learning opportunities for team members. 

OLIVER: One of London’s strengths is its vast pool of talent right the insurance sector. I think we all agree that meeting in person to build trust and discuss complex matters is much more efficient and helps brokers get the best solutions for their clients. It’s why most Lloyd’s syndicates have a daily physical presence at the box. However, as Chris says, more routine tasks should be handled remotely as this is quickest and easiest.

How have recent geopolitical events impacted the market and what advice do you have for insureds for navigating these challenges? 

ALEX: We’re very aware of the difficulty for insureds in managing the exchange of information following sudden geopolitical shifts. They need to partner with an experienced and knowledgeable broker for a solid understanding of their current coverage and what information underwriters require to ensure coverage is retained. 

CHRISTOPHER: Yes, as always, the more information and the earlier it’s provided the better. This allows underwriters to better understand their business and the protections in place. The London market is good at covering all kinds of complex risks, but underwriters need this high level of information to price these appropriately.

HELEN: As marine insurers, we’ve always supported international trade. As such, we have to recognise where our exposures lie and assess pricing and conditions against that exposure. Communication is key. For example, insurers will be contacting their brokers asking for information about exposures in the Red Sea at the moment. Understanding what we may have in the area allows us to tailor our approach. But not all of our portfolio would be affected by the same event, so we need to retain our bespoke, specialist approach to underwriting risk.
 
MICHAEL: The cargo market is inextricably linked with geopolitical events. Helen mentioned the Red Sea, but the Israel/Gaza conflict and the war in Ukraine are impacting stability too. These also result in an evolving environment for more general marine perils due to the reshuffling of trade patterns. We are closely watching situations in Taiwan and the Horn of Africa as well.

We work thoroughly with specialist security agencies that have a presence across the globe. This access to real-time information is invaluable and allows us to offer risk mitigation support to our clients in ever-changing environments.

OLIVER: I think we all believe in the importance of sharing information as quickly as possible so underwriters can assess the exposure and offer a meaningful solution with adequate cover. Also partnering with the brokers and underwriters who have the relevant expertise and experience will help navigate geopolitical shifts, especially given how quickly things can escalate. 

London has a reputation for being able to underwrite challenging interests and industries. In the last 12 months, can you give us an example of London continuing to offer innovative solutions? 

HELEN: The obvious one would be the export of grain from Ukraine through the UN grain corridor in the Black Sea. The corridor arrangement has since lapsed and the market continues to provide coverage for this humanitarian effort to ensure the global food supply chain. A less talked-about example is the continued global space race with increased numbers of satellite launches. This remains very niche within the cargo market for pre-launch exposures, and most of that capacity remains in London.
   
CHRISTOPHER: For us it would be the launch in late 2022 of our Project Cargo Consortium, representing seven Lloyd’s syndicates. The Consortium has a single agreement party and brings together Liberty’s Claims and Risk Engineering capabilities. It was designed to make smaller projects more efficient and its size has made it perfect to support energy transition. We’re looking forward to using it more widely in 2024.

ALEX: We too put together a consortium, supported by 11 other markets in Lloyd’s. This was to provide coverage for the full supply-chain for lithium-ion batteries. Brokers were finding it difficult to get these risks fully placed – it’s a work-intensive interest for underwriters in a rapidly changing marketplace for the product. With the assistance of our risk managers at Chubb, we were able to create a framework to underwrite our way through the risk and felt that a consortium was the most efficient means. 

MICHAEL: The London market’s ability to continuously offer coverage throughout unfolding events is a huge differentiator. Whilst other markets have pulled out of areas such as the Black Sea and Red Sea over the past two years, the London Market has underwritten its way through the conflicts, amending terms and conditions as circumstances change. This gives clients continuity of coverage when they need it most. At Navium, we offer tailored solutions for our clients in these difficult territories. London is also going to be essential in the redevelopment of Ukraine, and we want to be a big part of that.

OLIVER: One of the most pleasing things for me in 2023 was the London market broadening its appetite and looking at complex risks with a willingness to offer solutions. The coverage for grain exports from Ukraine, mentioned by Helen, Christopher’s new Project Cargo Consortium and Alex’s specialist consortium for covering lithium-ion batteries are all excellent examples of this. It shows London wants to be a true partner in working with brokers and insureds.

With the entrance of new capacity and underwriters looking for growth, what do you predict for 2024 in terms of rating, coverage and appetite?

ALEX: All things being equal, with no major shifts in the geopolitical environment and a benign loss year, rates are likely to soften. This softening is likely to accelerate as the year goes on. I expect coverage to remain static – a lot of hard work was done to return the cargo market to a sustainable place for coverage and wordings, and this won’t be given up. Appetite is an interesting concept – I expect a wider range of insurers will review areas that they don’t currently insure. We’re looking to our risk management functions to provide evidence-based ideas to expand our offering.

CHRISTOPHER: Given the trends around political instability, large-loss inflation and the increasing prevalence of non-modelled CAT I don’t foresee a significant change in rating, coverage or risk appetite in 2024. Many underwriters’ memories are still fresh with the problems the market faced in 2017 and 2018 and I don’t envision significant change to the disciplined underwriting we see today for some time.

HELEN: As the market seems to have benefitted from a relatively benign 2023 and carriers are hungry for growth, I would expect to see more business changing hands between brokers and some pricing pressure. However, we have to remain disciplined. Most of us remember the soft market years and their consequences. AXIS wants to retain its core portfolio while very much looking at the adequacy and profitability of our book. This is a dynamic market and one in which we see strong opportunities for growth. That includes the US, where we now also have a presence on the ground.  

MICHAEL: Climate change related weather events, an already predicted above-average 2024 Atlantic hurricane season and the shifting patterns of tornados and floods will continue to focus underwriters’ minds. 

2024 will be a year of political uncertainty too. Over half of the world's population go to the polls, with key elections in USA, India and South Africa, which will inevitably have ramifications of civil unrest both domestically and internationally. 

That being said, with underwriters experiencing both growth and improving loss ratios, new capacity is inevitable. I don’t think this is going to have a significant shift in the market coverage and pricing. with demand for capacity remaining extremely strong and remediation efforts continuing in the property market. 

We are working on the basis of a flat rating environment in 2024. We believe we will see another year of stability in the cargo market, resulting in predictability and increased capacity for clients. 

OLIVER: There are definitely questions over how rating will trend over the course of the year. We’ve seen signs of softening as appetite broadens and there’s more competition for new business. This is not universal across all industries or coverage aspects, but as competition grows there will be more and more pressure on rating and enhancing coverage. 

Our thanks go to Alex, Helen, Christopher and Michael for their insights.