Although the UK insurance market place remains strongly capitalised, insurers are seeking to improve the overall quality and risk-adequacy of their portfolio in an environment where rate increases following record losses in 2017 often failed to materialise as expected beyond loss-affected lines, according to Willis’ 2018 market place realities report.
Clyde Bernstein, Head of Broking GB, Willis Towers Watson, said; “prolonged market softening has taken its toll on industry profitability, however, the industry remains fitter and more resilient than in any previous market-correcting event.
“The market did not respond with across-the-board increases in rates leading some insurers to make difficult choices over their continued involvement in underperforming lines.”
The January 1st renewals were the first quantification of the future cost of capital following one of the worst loss years on record.
Insurers with catastrophe exposures and clients that employed aggressive buying strategies during softer times encountered more challenging treatment at renewal, according to analysts.
Willis explained that while insurers will try to pass on any increased cost to clients, “strong industry capitalisation, the ability of the Insurance Linked Securities sector to weather its first major test and successfully recapitalise, along with the regionalised nature of today’s global market, tempered underwriting hubris and led to a more measured rating environment.”
Despite the challenges of steep market competition, strong industry capitalisation contributed to a measured rating environment for commercial insurance buyers in the UK.
Willis’s price predictions for UK lines of business place the highest hopes for rate increases on marine cargo natural catastrophe-affected lines, forecasting these will be up 5% – 15%.
Non-affected marine cargo lines are expected to remain flat.
Financial & executive risks could be up by 5-10% for professional indemnity, financial institution risk is largely flat.
Product recall is forecast for 2.5% to 7.5% growth, environmental lines are flat to up 2.5%, political risk and credit is flat, trade credit is flat to up 5%.
UK lines of business with rates that appear set to decline in 2018 include; terrorism and political violence, forecast at -5% to flat, UK casualty flat to -5%, and UK property flat to -5%.
Willis compiled the report using data across its corporate risk and broking sector for the UK region and plans to launch the report on a bi-annual basis to provide a regular overview of the insurance marketplace across industry lines of business.
