Reinsurance News

Hard market becoming increasingly risky and challenging for insurers: Amwins

12th April 2022 - Author: Jack Willard

Specialty insurance wholesaler, Amwins has stated that the insurance industry continues to navigate the domestic and international challenges of the toughest market conditions most have ever seen.

AMWINSAs the industry entered into the second quarter of 2022, the broker expected to see more of a “slowdown” of the hard market conditions, than what has materialised.

However, Amwins warned that even with many carriers reporting improved loss ratios and record earnings, tightening capacity and rate increases are “not quite behind us.”

“We continue to see carriers shift away from volatility as they reduce the amount of limit deployed in high hazard classes, locations and perils, as well as simply exiting classes of business”, Amwins said.

Furthermore, Russia’s invasion of Ukraine is also expected to generate meaningful losses for certain lines of business and the economic effects of sanctions are putting additional pressure on oil prices and further accelerating US and global inflation.

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This comes shortly after analysts at RBC Capital Markets have stated that they are assuming industry aviation losses from sanctions on Russia will total $2 billion, constituting only an earnings event for UK specialty P&C insurers.

Amwins Chief Executive Officer, Scott Purviance, commented: “The onset of the new year has shown small snippets of relief in certain industries within an otherwise hard market. And while the market shows capacity, it’s becoming increasingly risky and challenging for insurers to put their capacity back to work.”

Meanwhile, the Federal Reserve has started raising rates in an effort to slow down inflation. But, the pace of interest rate increases and the impact on inflation are “wild cards”, and we likely wont know their full impact until further into 2022 and possibly even 2023.

Amwins also stated that in property, challenged classes and perils continue to see increases, but accounts with better risk characteristics are experiencing flat to moderate increases.

In the excess casualty space however, the market has settled down noticeably, professional lines rates have also been relatively stable since the start of the pandemic, with a few notable exceptions.

Amwins conclude by stating that reinsurers are re-evaluating their risk exposures in loss-prone regions and lines of business and are either “exiting entirely” or “significantly limiting” their capital deployment in those areas.

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