Posted in News on 06 Mar 2019

2019 is already being seen as a year of further mergers and acquisitions within the insurance arena, of stricter risk selection by carriers and capacity withdrawal from certain classes, as seen with recent market departures and there will be some change in the structure of certain syndicate portfolios in response to performance review, with further oversight planned, however there is a strong belief this will benefit all clients who value their long-standing relationships with their London carrier partners.

2019 could be another difficult year for reinsurers after the sector failed to achieve any significant rate rises in the January renewal season. Last year ranked as the fourth-highest loss year on record, with the Excess Casualty market bracing itself for further reserve increases from California wildfire events, the recent dam collapse at the Vale owned Feijao mine in Brazil, and out of the ordinary awards in the US Auto/Trucking sector.

However London is forecast to have spare capacity

There will also be increased pressure on performance for Programme Business and Coverholder arrangements, however there remains an abundance of capacity backing the MGA sector which utilises new technology and web-based platforms to gain market share and drive efficiency and profitability.

Whilst London predominantly remains an excess market for US Casualty risks, there has been an increase in carriers willing to consider Primary CGL and Lead Umbrella placements. The changing legal environment and loss deterioration in international territories such as the UK, Australia and Canada has forced London insurers to reconsider their position on US Liability, where there is a better return on the cost of capital. This is supported by the increase in Lloyd’s Consortium arrangements between syndicates, with some offering both Primary and Lead Umbrella solutions.

Established Lloyd’s syndicates continue to be competitive at Primary level for heavy industry, and products related risks. Larger Self-Insured Retentions (SIRs) are typically applied here, however the London marketplace is able to offer more alternatives sub the USD25m attachment point, than in the past.

Rate increases for certain industry sectors is now commonplace, most notably New York construction and trucking related risks where there is a shortage of capacity, but there are a numberof Lloyd’s syndicates and Company markets willing to support these at low attachments, the trade-off being significant premium requirements and access to analytical data.

In the high Excess space, there is a wealth of capacity. In some cases that capacity between the London and Bermuda underwriting teams is now shared rather than separate, but overall appetite remains unchanged and London continues to support all industry types, with minimum rate on line being a key requisite for a number carriers. Unsurprisingly, there has been further market withdrawal from wildfire and utility exposed risks and pipeline related operations. Some carriers also buy an aggregated product from the collateralised part of the ‘retro market.’ This market experienced back to back losses during the last two years - largely as a result of the ‘HIM’ hurricane losses in 2017, and the wildfires and other global natural catastrophe (‘nat cat’) events of 2018. As a result, the collaterialised markets currently have a significant part of their capital ‘trapped’ as they await notification and payment of losses. This market is therefore demanding significant increases, which will likely have an impact for those carriers renewing their treaty reinsurance programs at 1 April and beyond. There is no real change in average line size, USD25m remains the norm within the Excess community, with Primary capacity providers still writing smaller lines, between USD1 and USD5m. Occurrence cover is widely available, claims-made and occurrence reported triggers are also used, however certain London markets still prefer a claims-made form for heavy products exposures and certain “Hard to Place” operations.

Expansion of product lines available through London continues

In terms of new products lines, there has been a notable change in Product Recall where London is considered the world-leading market. Food & Beverage and limited Auto Products has now extended to include Auto Parts, Pharmaceutical Products (noninvasive), non-critical Aviation Products and Consumer Products.

The London market has also responded to the increase in new technology risks and non-traditional operations and can now offer a host of solutions for Community Share and Autonomous Vehicle related risks.

London remains a constructive open market for US Casualty

To summarize, the London US Casualty market remains a stable panel of experienced underwriters, that remain active across construction, energy, transportation, life science and other
products driven industries.

There will be some change in the structure of certain syndicate portfolios in response to performance review, with further oversight planned in 2019, however there is a strong belief this will benefit all clients who value their long-standing relationships with their London carrier partners.


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