Property insurers have their eyes fixed on the Atlantic hurricane season which was kicked off unusually early by Hurricane Beryl and is expected to generate an above-average number of named storms.
With eyes fixed on those developments, it’s critical for key players across the property insurance market to keep appraised of the latest market shifts, which were highlighted recently in Marsh’s latest ‘Global Insurance Market Index’. The index revealed that property insurance rates globally were flat, declining, or moderating in every region except IMEA.
The levelling off of rate improvements is a core trend being seen by Andy Camber and the team he leads as lead underwriter – property at AmTrust International. In the post-COVID property insurance market, reinsurers are recovering while insurers are still trying to recover, particularly when it comes to business interruption. Meanwhile, he said, other classes of business are driving the requirement to improve rate wherever insurers can get it.
Indeed the economic factors impacting the market are also on the radar for Julian Strutt (pictured), director – property & real estate at Charles Taylor, who highlighted the impact of rising claims costs and inflationary pressures on premiums.
Both Strutt and Camber emphasised the impact of changing regulation on the sector with Camber noting increased regulation around consumer business with the rollout of Consumer Duty. Strutt added that regulation and governance continue to become more stringent. “We’re seeing rigorous reviews – rightly so – of the controls and procedures we have in place to manage our delegated authority relationships with insurers,” he said. “I think this is a positive.”
He added that with regulation getting tighter, companies need to ensure they have a “firm and effective” framework in place. For example, he said, the FCA introduced its Consumer Duty in July 2023, which led to a review of the policies and procedures companies had in place and how they demonstrated they were actively supporting vulnerable customers.
“As a loss adjuster, we have to report how we’re identifying and managing vulnerable customers on a monthly basis and so the regulation puts a focus on different companies across the insurance sector,” he said. “To date, we’re yet to see whether the regulator will penalise those who flout the rules and understand what sort of penalties companies will receive for non-compliance.”
Fraud is another area under the microscope amid the changing scope of regulation, and Strutt said he’d like to see minimum regulatory standards introduced as this would likely create a more consistent approach to counter fraud across the whole market. Another key consideration around regulatory standards creating pressures was identified, by Camber, as Lloyd’s asserting itself as an additional regulator across its ysndicates.
“From what I’ve seen, they always want something slightly different to what the PRA or the FCA want, so it becomes quite a headache for a lot of syndicates,” he said. “Certainly, we’ve seen the opportunity to write business that the syndicates have moved away from because it’s too expensive to continue to write. They’d need to employ more people to remain compliant and they’ve weighed up the options and decided it’s just no longer sustainable.”
Beyond the regulatory sphere, the property insurance market is facing a number of other pressing considerations, among them the growing spotlight on the critical role sustainability and ESG play with regard to corporate thinking and operational strategies. Strutt said his team have seen the industry move towards making properties more resilient when carrying out reinstatement work. “This is certainly true in flood losses,” he said. “There’s a range of appetites for this approach between different insurers, but the direction of travel for the market as a whole is clear.”
Another challenge facing the sector is the loss of talent as firms compete to attract good quality recruits while managing the loss of experienced and qualified professionals. Strutt noted that, particularly in claims handling and loss adjusting, there is an increased number of people who have taken early retirement – often encouraged by the pandemic – and moved out of the sector.
Camber is seeing increasing demand for coinsurance and collaboration elsewhere in the market. Historically, he said, delegated authority would see an insurer giving 100% capacity to an MGA who would use that to write insurance on their behalf. As that capacity has started to contract, other insurers are now joining in to prop that back up. “Actually, for an MGA, you then have two insurer relationships rather than one which is a positive, because then you don’t have all your eggs in one basket,” he said. “[So, these market conditions] have created more coinsurance and collaboration within the insurance market, certainly for UK property.”
Another trend Strutt is seeing impact the property insurance landscape centres on supply chain disruptions, and he cited the rising cost of materials and labour as an increasing issue. The rate of cost increases is slowing down, he said, but inflation remains a factor and the market is unlikely to see any falls from this new normal.
The demand on the property and construction sector supply chain means there’s an ongoing challenge to get new projects up and running and to make sure people and materials are all in place to get work completed without significant budget increases. All this, in turn, feeds back into the premiums policyholders pay, making it critical that the industry looks to manage the supply chain effectively to ensure clients get the service and response they need when they make a claim.
From Strutt’s perspective, a large part of implementing this successfully rests on agile decision making. It’s important to make the correct decisions on liability and reinstatement approaches, he said, but making quick decisions is also crucial. The longer a claim lasts, the more expensive it becomes and this benefits no-one. “Similarly,” he said, “facing challenges quickly and transparently enables all stakeholders to work towards the required solution. Agile decision making helps the market to provide clients with solutions and to do so quickly, effectively and innovatively.”
