Broking giant Willis Towers Watson has predicted further stability for North American commercial insurance moving into 2022, thanks to strong capital returns and growing rate adequacy confidence.
The broking giant welcomed this in its report, considering it evidence of a segment breaking free from the steep and relentless cycles which had come to define it.
In its explanation of how commercial insurance in the region of had fallen into the cycles, WTW points to a systematic rise in risk driven by heightened catastrophe losses, likely driven by climate change.
This increased risk, the report says, has over the years been compounded by complicated and existential challenges posed by cyber and social inflation-driven fiduciary liability cover.
In fact, it’s in these two areas that analysts expect to see exceptions to an otherwise more moderate market; both affected by increasingly steep rates and uncertainty.
“For the most part, we are moving toward stability as we watch the workings of a simple economic law — supply and demand,” said Jon Drummond, senior editor, Insurance Marketplace Realities and head of Broking, North America at WTW.
“That does not mean, however, that this is a simple marketplace. The two-tiered marketplace we highlighted in our last issue remains a reality in many lines of business; conditions are better for better risks and tougher — sometimes quite a bit tougher — for less attractive risks.”
In its assessment of the segment, the report also acknowledges the challenges posed to leadership in developing talent during an increasingly work-from-home environment.
However, the broker also notes the inherent benefits of this change and unique advantages it offers.
“We’ve discovered we can do our work remotely, most of it anyway, and that the virtual world has some advantages,” said Drummond.
“It’s easier to bring people together for meetings, and for insurance buyers, bringing the C-suite to the negotiating table can have noticeably positive effects. Those meetings are also easier to organize virtually with underwriters sitting across the world and in venues some risk managers may never have had the opportunity to visit,” he added.
The report concludes by stating that, while the near-term cost of insurance is expected to increase, marketplace results should overall be less painful.
“For better or worse, our industry will continue to move with the laws of supply and demand,” said Drummond.
“If supply continues to come back as it has in the second and third quarters of 2021, we could see rate decreases commence as early as the second quarter of 2022.
“This will not be a wholesale development across all lines, and distressed lines of business, most notably cyber, will remain challenged well into 2022.”