A species once believed extinct has begun to reappear: specialty insurance renewal quotations which are more expensive by a few percentage points. After years of annual reductions, this phenomenon is now spotted with increasing frequency, even for those with clean programmes. The direction of travel has changed for many reasons, but it is still possible to obtain high-quality cover without paying over the odds.
Consolidation amongst brokers and insurers is one factor behind the changing price landscape. A market with fewer, bigger companies is less inclined towards unsustainable competition, and more comfortable refusing under-priced business. Large losses and natural catastrophes have also played a role. After two years which together delivered more than $200 billion in extraordinary claims, underwriters have realised that too-cheap insurance cannot coexist with what some worry is a new-normal frequency for catastrophes.
As a result, many insurers have muted their appetite for underperforming lines of business dramatically, or withdrawn from them completely. Such remedial action has been most high-profile at Lloyd’s, where an unprecedented initiative – the ‘Decile 10’ – saw the market’s central underwriting authority cajole many underwriting syndicates into scaling back their underwriting in several specific risk classes. By purging surplus risk capacity, this action undoubtedly pushed up London prices in affected classes.
What does this mean for clients?
These changed market dynamics have had repercussions, but buyers need not be disadvantaged on price or service. Individual outcomes remain dependent on the client and their circumstances, but for most it is possible to complete even the largest insurance programme at an attractive price. A clean loss record and a well-established risk management regime will help. A focus on data is another significant advantage, as underwriters adopt an ever-more technical approach. A considered risk retention strategy, perhaps including captives, can likewise play a significant role. In a relationship business, loyalty also contributes: customers that consistently chose to chop and change in pursuit of the lowest price may now find increased premiums difficult to avoid.
Relevance of London
Lloyd’s and the wider London market remain important and relevant. Global trends are still initiated from the underwriting boxes of Lime Street. One of those is genuflection towards sustainable (code for profitable) underwriting. This is not unwelcome, since profits are essential to the financial health of the companies that assume the world’s commercial risk. However, other international markets are playing catch-up with London’s rate changes, such that many highly capitalised, well-regulated companies from Singapore to Oslo, Miami, Hamilton, Dubai, and Zurich continue to offer complex risk transfer at yesterday’s prices.
A global broker
Miller has grown well beyond its London origins to build relationships with all the leading risk carriers and underwriters around the world. It has access to the best of this catch-up capacity, and regularly looks beyond London to find competitive prices and solid service. This is a limited-time opportunity, since the rest of the world is likely to follow London’s lead soon, and a switch may endanger your loyalty bonus. However, now is a good time to explore all the possibilities. Our teams would be happy to talk through your options.