Transcript:
Q3 2023 Global Marketplace Insights
0:07
Welcome to WTW's Global Marketplace Insight series where our
experts bring you the latest risk and insurance perspectives.
0:20
Good day everyone and welcome to our third quarter video on the
market circumstances and what we see out there for you in the
insurance world.
0:32
First of all, I appreciate your views.
0:35
The videos have been watched quite a lot and we appreciate the
feedback that you've given and continue doing that.
0:42
We learn from it and want to make these better than we do
already.
0:47
This quarter again like we did in the first quarter a broader set
of videos.
0:53
So last quarter you had to do it with Swifty and myself giving the
overview.
0:57
This quarter again we're looking at every line of business
giving a global view on the on their line of business and geography
leaders going into the market circumstances in the area that they
operate.
1:11
So you get the full view of the entire market again from us in this
quarter.
1:17
So when Swifty and I did the second quarter video the results of
insurers were not out yet. They clearly are now.
1:27
So we can have a bit of a look at that to give you some context on
where the market is heading.
1:34
And what we've seen over the second quarter and the first half
year insurer results is that they have been improving further.
1:42
So the average combined ratio which is the technical results of
insurers went further down to the low 90s.
1:50
So there is a profit made by the carriers.
1:55
All of them opened up in their analyst calls with that premium is
just ahead of the of the lost one as they as they would.
2:02
But the technical results as they've gone in the first half
year have shown good improvements on loss ratios.
2:12
And in addition to that we have seen that also the investment
yields are coming back coming out of a period with hardly any
investment yields over the last couple of years.
2:23
That is starting to get into the numbers as well.
2:27
And also on the reinsurance side we've seen similar
developments.
2:32
Reinsurers, as we all know at the end of last year had a big kick
in the market to get the premiums up because of poor results.
2:41
What we have seen in the first half year is that they also came
down below the 100% mark and actually making a profit on their
business.
2:50
So we're looking to be in a good place from a result
perspective in the market.
2:58
Not all is good.
2:58
What we see is that personal lines insurers especially in the US
being hit quite heavily on the natural catastrophe side actually
are so in a worse place in a commercial bit.
3:13
But also there we see the premium increases that have come
throughout the last quarters starting to show into the numbers and
getting their results back into the healthy space.
3:27
So where does it leave us now in the market?
3:31
Q2 was sort of like tailing off the premium increases that
we've seen over a long period and that has been shown into
further stabilization in the last quarter.
3:44
So it isn't flat yet.
3:47
There's still increases to be absorbed by our clients.
3:53
But in general, what we see is that it's getting closer to the
zero and in some instances even a decreasing trend to premiums.
4:02
Basically, there's four areas that I want to get slightly into
in this video to give you an overview of where the problem areas
still are with insurers.
4:12
First of all, when it's a recurring theme, it's a natural
catastrophe.
4:17
The second is the social inflation.
4:18
We went into that a couple of times already, but that seems to
spike, especially now.
4:25
Economic inflation is the third one and the last one is the
uncertainty on how the reinsurance market is going to react at the
year end, which is coming up quickly.
4:36
So on the catastrophe area, we saw a third quarter that from a US
perspective looked pretty good, I would say below average.
4:47
But if you take it on a global scale, we've seen a lot of
natural catastrophes around the globe in areas that we haven't
seen them for quite a long time.
4:56
And whether it's windstorms or hail or bush fires or drought or
heat, it has been around the globe and hit the insurance market as
well.
5:09
We're not particularly precise in how it actually gets to the
insurers, but it will have an effect on their results and it needs
to be seen.
5:19
So catastrophe and there were property catastrophe is one of the
areas of concern.
5:26
Second one is the social inflation and what we've seen over the
years 2515 to 2020 has been pretty benign.
5:35
But since then and after COVID, when there was sort of a catch up
in claims, we've seen especially the nuclear verdicts or the
massive verdicts on what we see relatively small events has been
huge.
5:52
There's a fault number of big claims getting into the
market.
5:57
I almost would invite you to Google the nuclear verdicts and look
at a couple of the examples.
6:01
But one of the triggers of that is that the litigation financing
that is now available for people that actually get financed to
litigate against your insurer is a growing industry.
6:14
And that has led to a number of these vast number of these massive
verdicts that get into our market as well.
6:24
The economic inflation seems to tail off a bit, bit less of an
issue with most of the carriers still there, but something that we
get used to deal with.
6:37
And finally we've got the uncertainty of the reinsurance market
and that is a big question to GRMs.
6:43
The messaging we get from the reinsurance market is that
there's a need for another round of premium increases.
6:51
Look at the results, that's something that we try to fight hard
as we can.
6:58
But the big four reinsurance don't seem to want to grow
massively compared to where they are today and to sort of sacrifice
results on that.
7:08
So bottom line results on that.
7:10
So again, it looks like stabilizing could be another little go in
there.
7:17
So overall, if you look at the market, we see insurers still
wanting to grow.
7:23
All the discussions we have with them is we want more of this and
get into our appetite and we'll come up with the right
answers.
7:32
So going through line by line and property Cat dominated where
there's no Cats., there's good deals to be had in the US
especially and then focus on a couple of states, California,
Florida being the most difficult ones.
7:50
If you look at the homeowners, they get out of the retail market
into the ENS market with huge increases.
8:00
On the reinsurance side, we see capacity going up.
8:02
So bigger retentions for the direct markets with which leads to
increased volatility.
8:08
So carriers have to deal with that outside of the US a bigger focus
on natural catastrophe risk in general again following the events
that we've seen over the last quarter or the last half
year.
8:23
So it's a bit of a mixed bag in property.
8:26
If you're non Cat you look you look pretty good.
8:28
If you're Cat driven it's still tough to work the market to
the right deal.
8:38
On casualty, we still see slight increases especially with the
threat of the social inflation accounts in the US where you get
motor transportation risks that is remains to be difficult around
the globe still I mean stable to to slightly up. On the directors
and officers, market continues to be relatively soft although we
see a sort of a normalization of the premium decreases.
9:08
So the big ones that we have seen in the last 12 months are
starting to sort of tail off a little bit and but we still see
prices going down which is the same on other financial lines,
single digit premium reductions tO stable on professional
indemnity, the M&A products, financial institutions, that's
where we see those kinds of developments.
9:37
A bit more of those in cyber. So cyber starts to I wouldn't say
soften but getting a bit more relaxed.
9:43
Primary area is where the capacity still is quite scarce.
9:48
If you go excess you get a bit more opportunities and that's
shown into premium developments as well.
9:55
So primary is stable, the excess is good deals, good deals to be
had out of the market.
10:04
If we look at the marine market the liability lines are again under
the pressure of the social inflation are difficult at the whole
side and the cargo side is flattening and and pretty stable.
10:19
So I'm on construction with a bit of focus on the on the
coverage elements that's where the main focus is.
10:27
But apart from that it's a good market to trade in.
10:30
And finally the aviation lines we go in the old risk area we see
stabilizing to slightly down.
10:38
If we go into the war that is still a very tough market to get
capacity and that's similar for political violence and
terrorism where we still see a hot market and difficulties to get
our deals done.
10:57
So the outlook, where does it leave us? Again, a mixed bag, some
good, it's all tailing off a little bit into a better place for
our clients overall.
11:08
Keep saying insurers continue to want to grow.
11:12
Discussions we have with them is around appetite and how we can
sort of get that into in front of them to quote your business.
11:18
Three's more options apart from the problem areas, but
there's more options and a bit more of a relaxed market to
trade in.
11:28
So better deals to be had.
11:29
And the good news is compared to really the last years is that
there's more of an individual approach to underwriting.
11:36
So individual clients can have a discussion around the key risk and
have a negotiation, true negotiation rather than the books being
remediated and insurers taking a portfolio stance around that.
11:48
So we believe that the market is getting into a better place.
11:54
We're very much looking forward to track your business into the
market in the fourth quarter.
11:59
And again, once that is done, we'll be back on video with you
to give you an overview on how that went.
12:08
And as I said at the start, we appreciate your views, we appreciate
your feedback.
12:12
So let's keep that coming and looking forward to seeing you in
real life when we meet in market meetings or at the next video that
will be out after the fourth quarter.
12:24
Thank you.
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