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Brokers in the specialist M&A warranty and indemnity (W&I) insurance sector are enjoying a positive upswing as new insurers flow into the market, sending rates down and coverage up.
A report on the W&I market released by AIG this week claimed that we are seeing an “influx” of new M&A insurers entering the space.
That’s been good news for brokers and their clients, according to David Walters, Warranty & Indemnity Director at PIB Insurance Brokers, which is part of PIB Group, who says there has been a “fundamental shift” in the market.
“What has happened over the last couple of years, is that new underwriting businesses have come to the market. They’ve been a little bit like a disruptor in that they’ve looked at the traditional underwriting model – which can be seen to be a little bit intrusive and a little bit clunky – and they’ve thought, actually, we can underwrite certain deals, particularly around real estate, in a slightly more streamlined fashion,” he told Insurance Business.
As a result, premium prices are being driven down: “Certain sections of the market are writing at premium levels that are a lot more attractive to a certain deal size,” Walters said.
While historically there has been a “handful” of insurers writing W&I policies, that is fast changing, according to the director.
“There are now more than 20 insurers writing W&I in London, whereas two or three years ago the number would have been less than 10,” he said.
As with any other insurance market, increased competition means changing dynamics. While Walters describes the W&I market as “always having been innovative,” he says it is in a particularly exciting time right now.
“What I think that gives is a real benefit to insureds in terms of pricing, coverage, market flexibility, and in terms of the underwriting process itself – which for relatively benign deals can be simplified quite significantly,” he said.
That’s making W&I insurance a more attractive purchase, and even bringing in a new set of buyers who may have previously been put off by high prices and narrower coverage.
“That conversation now is getting very meaningful, and [buyers] are saying – if that’s what the market is doing now, maybe we’ll start looking at W&I again,” Walters said.
In its report this week, AIG warned that carriers in the space will need to manage the changing conditions carefully to ensure that the market remains sustainable in the long term.
According to Walters, there is still room for more underwriters to enter the market.
“I think the competition right now is healthy,” he said. “I think the next 12 months, certainly in terms of underwriting capacity, is going to be absolutely crucial for the long-term development of the market.”
