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.