The specialties reinsurance market globally is emerging from a turbulent time in its history, with the January 1st 2023 renewals “marking one of the most challenging placement periods in decades”, reports reinsurance broker Guy Carpenter, part of global broker Marsh, in a just-published report, Guy Carpenter’s Global Specialties 2023 Market Update.
GC noted that “a confluence of macro-economic factors and historical performance issues caused a step change in conditions across nearly every sector”.
It said that since then a greater sense of stability had returned at the mid-year renewals, but accepted that the market remained challenging for insurers looking to cede risk at what they felt was a decent price.
“Firming rate pressures in key markets continue, capacity at the lower end of programmes is limited. We have witnessed large shifts in the appetite of reinsurers for certain covers, while terms and conditions are tight”, the broker said.
The reinsurance broker said that conditions had calmed since the “turbulent” January 1st 2023 market renewals, but that “the market remains challenged”.
Guy Carpenter said that the energy market was facing continuing challenges from the Russia-Ukraine conflict, contending with a reduced premium level resulting from global sanctions.
Marine reinsurers had been consistent in excluding losses on land and limiting cover available for voyages and shipping risks within the conflict zone.
Commenting on the global issues impacting the marine market, James Summers, Deputy CEO of Global Specialties and Global Head of Marine & Energy Specialty, said: “With an ongoing military conflict in Europe and the potential for an escalation in geopolitical tensions in other parts of the world, the marine market finds itself in uncharted territory as it assesses the current and future impact on vessel movements.”
Renewals for programmes with war, terrorism and political violence exposures were thought likely “to remain challenging”.
The broker felt that there was likely to be increased demand for renewable products, alongside a continuing need for coverage of legacy fossil fuel assets through the energy transition.
Inflation also continues to affect market dynamics. Nick Jay, Deputy Global Head, Marine & Energy Specialty, said that “inflation is still a significant factor for both insurers and reinsurers in the marine and energy markets. While insured values are customarily adjusted in line with rising inflation, the cost of repairs and potential time delays are both issues for the market. Inflation is also driving demand for more limit as values are reassessed.”
Addressing the importance of data-driven renewals discussions, Summers said that “Guy Carpenter believes that the focus at renewals should be on what the client needs to buy, and negotiations should be transparent, data-led, and appropriate. Data continues to be key to understanding the original risk and finding alignment between insurers and reinsurers.”
https://www.guycarp.com/insights/2023/09/global-specialties-2023-market-update.html