Is the global insurance market softening? Not exactly according to industry stakeholders, including major brokerages Marsh, WTW and Aon. Reports from these firms say that directors and officers (D&O) is soft and cyber is soft or getting close. However, inflationary and capacity pressures remain across other lines, including property and casualty (P&C) insurance.
“The insurance market is transitioning between hard to soft,” said Scott Eccleston (pictured above). “I would classify it as multi-speed.”
Eccleston is head of Global Placement for Marsh in the Pacific Region. He said that the D&O market is now in a soft cycle.
“Whereas all other classes aren’t quite there yet,” said the Melbourne-based broker.
The Marsh leader said improved insurer underwriting performance and increased overall profitability are behind the softening.
“This has led to an increased appetite for growth and a welcome return of competition and choice for insureds,” he said. “Insurers have entered growth mode but are still cautious, in particular for insureds who have natural catastrophe exposures.”
Globally, those exposures came into sharp focus this week.
The Insurance Bureau of Canada (IBC) has urged the government to collaborate on reducing disaster risk after four catastrophic weather events resulted in over CA$7 billion in insured losses. The summer of 2024 has become the most destructive in Canadian history for insured losses linked to severe weather.
Meanwhile, the UK is experiencing serious flooding and California is being ravaged by the massive Bridge Fire.
At the time of writing, evacuations are underway in Florida as Helene, a category 1 hurricane, bears down on the coast.
However, despite these challenges, brokers and consumers in some markets are seeing more coverage choices.
Eccleston pointed to Australia.
“We’re seeing more choice of insurers, both existing insurers with broadened appetite as well as new market entrants such as Everest, Markel and the continual emergence of new insurance MGAs (managing general agents),” he said.
In March, Australia’s regulator granted Everest International Reinsurance a licence to operate as a general insurer in the country. The firm is a subsidiary of Everest Group, a global player in underwriting specialising in speciality reinsurance and insurance products, casualty and property.
The property market in Australia – and likely elsewhere – is a good example of Eccleston’s description of global insurance markets as “multispeed.”
He said the situation for brokers and customers in Australia’s commercial property insurance market is currently quite different to its domestic counterpart. For the first time in years, the commercial market has seen rates fall by an average of 4%, according to Marsh figures.
“The domestic market is still very challenged for homeowners in natural catastrophe areas for storms or bushfire, as well as the motor vehicle insurance market where inflationary pressures are negatively affecting the cost of repairs,” said Eccleston.
One reason for the difference is underwriting performance.
“Commercial property insurance market premium rates have been increasing for more than seven years so the recent change in buying conditions is not a surprise,” he said. “Underwriting performance has significantly improved and the hard market phase went one year longer than some expected.”
Eccleston said insurers have “more than achieved the rate adequacy they need or desire.”
Another sign of market softening, said Eccleston, is the return of long-term agreements (LTAs).
“I wouldn’t say LTAs are widespread yet but they are certainly back in the frame and being discussed,” he said.
The Marsh leader recommended that insureds seriously consider LTAs in the D&O market, especially if they are changing their carrier.
“This would offer certainty for year 2 or even year 3,” said Eccleston. “Overall it is a positive sign for everyone that LTAs are back in vogue.”
In a recent article, the Agent Support Network of America (ASNOA), a network of insurance agencies, was reasonably confident that insurance markets will continue to soften through 2025.
What signs of insurance market softening are you seeing? Please tell us below
