Risk managers are faced with a new reality, one that includes lower risk appetites, reduced capacity, and increased rates. Meanwhile, insurers are facing their own challenges as reinsurers have been withdrawing capacity, but high demand has meant an increase in reinsurance costs.
While ongoing inflationary pressure, supply chain challenges, geopolitical instability, and climate-driven events weigh heavily in underwriting discussions, insurers remain focused on profitable growth during mid-year reinsurance renewals.
“Competition and appetite are healthy, but insurers are closely monitoring their exposures and deploying capacity based on careful risk selection,” says Brian Wanat, Aon’s Chief Broking Officer for Commercial Risk Solutions in the US.
Trends to watch
- Geopolitical instability, supply chain challenges and macroeconomic volatility continue to create uncertainty. Inflation and the need for increased demand for limits is still top of mind. The increase in Secondary Perils losses have also put pressure on carriers as they are not modelled for and therefore have not been priced appropriately. Losses and lack of return on equity has led to a squeeze on supply of natural catastrophe capacity.
- Demand for capacity and flexibility continues to grow, and alternatives to traditional risk transfer solutions such as captives, alternative retention and limit strategies, “buffer” programs, parametric triggers, and large limit facilities such as the Aon Client Treaty play an increasingly important role in helping risk managers execute their risk management strategies.
- A two-tiered market has developed, with products and in-appetite risks targeted for insurer growth experiencing flat or decreased pricing and abundant capacity. On the other hand, challenging, poor-performing or out-of-appetite risks are experiencing material rate increases and tight capacity, although conditions are more moderate than in previous cycles.
Supply Chain: What is the importance of supply chain resilience amidst complexities and challenges of global supply chains?
Environmental, Social, and Governance: Having emerged as key underwriting consideration, how can you differentiate your risk?
Inflation: What alternative solutions can you look towards to manage risk as a result of inflation?
Cyber: How can you bring sustainability and scalability to your cyber claims/risk management strategies as the nature of cyber risk evolves?