Thomas Haddrill, Head of Broking CEEMEA, discusses the impact of the more recent natural catastrophes, economic and political pressures.

CEEMEA insurance marketplace update
Hear from our experts and learn more about the latest insurance marketplace trends

Transcript:

CEEMEA insurance marketplace update

0:03
Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.

0:19
Hello, I'm Tom Haddrill and I'm the Head of Broking for Central and Eastern Europe, the Middle East and Africa or CEEMEA as we refer to it at WTW.

0:28
I'm delighted to be able to bring you another market update for our region.

0:33
In our part of the world, we're still dealing with a cautious market sentiment on the part of insurance carriers.

0:39
In Europe and in Africa, we're continuing to see losses increase and claims cross creep upwards from economic and social inflation.

0:45
We see supply chain disruption and volatile pricing of core goods and services.

0:50
All of this conspires to increase insurance costs for buyers.

0:55
Since my last update, most carriers have published annual results for 2022, with many now reporting strong operating profits.

1:23
Nevertheless, we are seeing carriers still conservatively adapting their portfolios.

1:28
Growth oriented capacity is being aimed at low risk areas and at parts of the market which were remediated earlier in the cycle such as D&O and cyber.

1:37
Here we are definitely seeing the beginning of a softening or soft market with coverage exclusions and T's and C's now in place.

1:45
Clients can expect to see more downward activity on pricing in these two areas.

1:49
This was supported by more benign reinsurance pricing at the mid-year renewal point, especially when compared to last January.

1:57
The same cannot be said for natural catastrophe exposed insurance programs, the first half of this year and the European summer has seen a wave of Nat-Cat losses impacting our region.

2:07
I discussed the shocking Turkey-Syria earthquake in my Q1 update, but since then we have seen severe storms affecting the Mediterranean and Southern Europe.

2:15
Wildfires in Greece, flooding in East Africa, repeat flooding in the Eastern Cape and Kwazulu Natal regions of South Africa, and now very recently the tragic earthquake in Morocco and deadly flooding in Libya.

2:29
The impact of climate change in this landscape is naturally a concern for carriers.

2:33
Are we seeing the effects of climate change or is this simply a very severe year for weather. combining with poor infrastructure is a subpar built environment and low investment in resiliency contributing to manmade frequency and severity.

2:47
Against this backdrop, buyers should be considering their exposures to Nat-Cat and ensuring that they have understood the perils whilst also increasing their focus on the impacts of business interruption.

2:58
Risk managers should engage to ensure valuations that are up to scratch and we would advocate for the use of more in depth and sophisticated modelling and analytical tools by risk managers.

3:07
And we can offer significant assistance to clients in this area.

3:12
So let's dive into a few of the key countries and regions.

3:16
In South Africa, insurers have posted growth and predominantly reported profits for 2022, but premium growth failed to outstrip inflation plus large Cats and in claims inflation dragged on operating profits.

3:30
The slow growth and flight to quality and underwriting has sparked some M&A in the market which is further consolidating these trends.

3:38
In property, pricing continues to increase, albeit at a decreasing rate, and the market continues to debate the challenges of business interruption claims, grid failure exclusions and load shedding claims.

3:50
This is alongside the ongoing impact of large losses coming from floods, the pandemic and civil commotion.

3:57
All of this will have an ongoing impact on reinsurance costs, which have already increased two or three fold in the last few years.

4:04
Electricity grid failure is a major concern for insurers and reinsurers who are worried about the increasing likelihood of its occurrence and the accumulation risk that it presents.

4:13
All insurers have therefore excluded losses due to grid failure.

4:17
However, there is little consistency in the wording of the exclusion across the market and insurers have now started to restrict BI resulting from the failure of other utilities and services.

4:28
Our teams have been engaging with the market and can advise clients on this complex picture and postures to adopt to navigate the intricate coverage landscape.

4:38
In Eastern Europe, conditions remain constrained and there is decreasing appetite amongst carriers for certain industries and occupancies such as the energy sector and plastic processing.

4:49
Deductibles are continuing to increase and new exclusions are being added by insurers who are tightening terms and conditions.

4:56
Moreover, we're seeing price increases of between 10% and 30%, which is driven by inflation and rising reinsurance costs, but also but also by some regulatory changes.

5:06
For example, in Romania the regulator has raised the guarantee fund levy following the insolvency of another major insurer.

5:14
The market was rattled by the collapse of City Insurance last year and now Euro INS Romania.

5:19
Euro INS was the largest non life insurer in Romania and had taken the top spot from City Insurance.

5:24
This has led to a reduction in insurer appetite across the board.

5:28
Moving over to Turkey, the insurance market continues to see capacity reductions following the devastating earthquake earlier this year.

5:35
Risks from mid corporate up to large industrial segments are challenged with prices increasing even for loss free programs.

5:42
Prices are increasing anywhere from 30% to over 100% for property and insurers are firmly increasing deductibles.

5:49
We foresee this continuing through 2023 and 2024 as insurers are seeking to get a handle on accumulations for the Marmara region in the Northwest.

5:58
However, across the board in Samir, the market is growing strongly and this gives us a really good footing to advise clients on strategies to achieve long term partnership with carriers.

6:09
We encourage early engagement to ensure that the full suite of broking services can be delivered including accessing international capacity.

6:17
This is something WTW is well positioned to deliver and we are working closely with clients to develop strategies that suit their risks and to deploy our extensive capabilities in risk and analytics and in working with industry experts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.