A recent survey conducted by international insurance broker Howden, shows that 80% of insurers are planning to achieve significant growth within sustainable energy throughout 2023, with an average planned GWP growth of 13% across respondents.
The broker’s annual London Market Appetite Survey assesses the underwriting appetite by line of business and provides a comprehensive outlook for the London Market in 2023.
The survey featured 43 insurers, 13% more than the previous years 38, and was conducted in December 2022. It comprised of a mixture of Lloyd’s syndicates and company markets.
In this year’s report, Howden noted that the stand-out class of business was Sustainable Energy, with energy transition and climate resilience being at the top of the industry’s agenda.
Findings from the survey showed that the majority of insurers are planning for double-digit growth within this area, which will mostly be driven by new business, rather than rate, and two additional carriers considering entering the space.
However, Howden noted that whilst the appetite for this line of business remains strong, the expected risk adjusted rate change is subdued, which heavily suggests that planned growth will be driven primarily by new business.
Interestingly, after experiencing a number of years of rate decreases, Political War & Terrorism is beginning to see a revival, according to the survey, with 2022 being a “watershed moment” for the PVT market, following the record year of social unrest, as well as the upheaval caused by the ongoing Ukraine & Russia conflict.
Findings from the survey showed that this year, respondents are anticipating another year of rate increases, with the average RARC being close to 20%. However, various new types of cyber-attacks, as well as the ambiguity of war exemptions will likely continue to complicate this line of business, and may even go on to create a greater connection between the PVT and cyber market.
Moreover, 2022 was also a significant year for the Cyber market, as it was clearly validated in the report, which sees an average achieved RARC for 2022 close to 50%.
Findings from this year’s survey also estimates that rate increases will be closer to 15%, following further capacity entering what is already a competitive market.
Howden noted that a reduction in ransomware activity, as well as an improvement in loss ratios, and an increase in capacity are converging to create a more stable environment. However, the broker warns that there are signs that cyber and ransomware attacks are on the rise, and the focus of these attacks is once again shifting to the West, potentially destabilising the market after this period of settlement.
Additionally, 2023 is also expected to see the appetite for North American property to remain as muted as it was last year. But, according to the survey, rates are expected to increase by an average of 14%, with some carriers even predicting a 30% rise. For US CAT business, respondent appetite is equally as muted with an average estimated RARC of 50% for 2023.
Author of the report Paul Cumberland, Executive Director, Howden Markets Consulting, said: “With the relatively modest rate increase anticipated for next year across the market place as a whole, it is tempting to think that we are now in a ‘soft market’, however really it is the rate of rate increase that is slowing and that many classes are peaking in terms of rate adequacy.”
Mark Gregory, CEO of AXIS International, commented: “Howden’s London Market Appetite Survey provides valuable insights into current market appetite and sentiment. Findings in the report significantly contribute to our assessment of growth opportunities in the London market and our approach to particular specialist lines of risk, helping us continue to differentiate our propositions to brokers and for clients on a global scale.”
