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Global Marketplace Insights Q2 2023

August 1, 2023

Our latest global perspective, highlighting regional insights and insurance trends across a wide range of industries and markets.
Aerospace|Casualty|Claims|Corporate Risk Tools and Technology|Medioambiental|Financial, Executive and Professional Risks (FINEX)
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Q2 2023 Global Marketplace Insights

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

In our latest quarterly Global Marketplace update video, senior leaders Alastair Swift, Head of CRB Global Lines of Business & CEO OF Willis Limited, and Hugo Wegbrans, Global Head of Broking discuss the returning focus on premium growth from insurers and what this means for our clients.

After a couple of years of stronger results, insurers aren’t talking about remediating portfolios any more; they’re all talking about growth, albeit selective and sensible growth with a watchful eye on peril aggregation. With that, we flag what we see as some forthcoming cautious price moderation, assuming a relatively benign cat season, as competition increases and capacity rises to meet most of the demand.

For insurance clients, however, the ability to access global markets, early presentation of risks and providing as much rich data and information about the nature and extent of your risks as possible will be key components of benefitting from these trends, including taking account of the potential impacts of economic and social inflation on future claims.

One thing to watch, particularly in war, political risk and cyber classes, will be reinsurance pressures on wordings come the next renewal season.

And finally, in this short video we provide you with a brief update on the successful recent tests of WTW’s Broking Platform as we continue our quest to compress and reduce costs in the insurance value chain.

HUGO WEGBRANS: Welcome to the second WTW market video, looking back at the second quarter. We did this in the first quarter with all our lines of business and all our regional leaders to give you an overview around the globe. We'll probably do so in the third quarter again, but in the intermediate second quarter, it's just Swifty and myself to update you on what we see-- what we see around the globe.

And in the next couple of minutes, we'll give you, again, an overview on what's happening on capacity, what's happening on coverage, on issues in the market and on pricing. So Swifty, let's start off. I mean, the first quarter, we concluded that the results of carriers have been good over the last couple of years. There were a lot of smiles. There was a bit of worry around the reinsurance renewals on the 1st of January, because that was pretty hectic let's put it that way. So how has that landed in second quarter? What do we see now with insurers?

Yeah, thanks, Hugo. Look, I think it's fascinating at the moment. No one's talking about remediating their portfolios anymore. And they're all talking about growth. So every conversation we have with an insurer at the moment seems to be in some shape or form, how do they grow their portfolio of business. Now they're trying to be selective in that growth. They're trying to be sensible around where they grow. Aggregated perils still an issue for a lot of insurers out there. But at the end of the day, they all seem to have significant growth objectives.

And with that, I think we are starting to see a moderation in certain lines of business now from a rating perspective as that competition comes through.

Yeah. And as-- I mean, it's something I see with a number of the carriers as well. And it's almost like they're getting a little bit nervous around what's the next step to win business, to get their hands on premium. So it's almost like well, we come from a period where indeed remediation gave sort of market activity, and people could look at business and start quoting business and prices going up actually helped a lot.

We do see-- I'm pretty sure you see the same is people get a bit more, I wouldn't say worried, but cautious on how they win business. And no one wants to get into a sort of a price war going down, and that is-- well, I wouldn't say make them nervous, but think around their-- around their proposition and how they can bring it to our clients. So looking at capacity, it, sort of, dipped down over the last couple of years. What do we see now in the first two quarters or in the second quarter?

Look, I think in general, for most risks that are out there, seems to be enough capacity. There may not be an excess of capacity, which would be leading to maybe some more aggressive pricing from carriers. But in most lines of business, there seems to be enough capacity for what needs to be placed. Probably the exception to that is in the US, in certain CAT areas, there's still pressure because there are various MGAs and ENS markets that are withdrawn from whether it be sort of rising California earthquake or Florida windstorm risks or flood. And that is putting some pressure still on in that marketplace.

And as a result of that, we're seeing a lot of business move from where it's traditionally been placed to other geographies around the world. I think London is being used more in, certainly, for North American property than it ever has done in the past. So that transition and that ability to be able to access the global marketplace for a client is vital, because if they do, the capacity normally is there. The question more then comes down to price.

The other thing that we're seeing as a result of that is there is a lot of influx of new risks into the market and some of the insurers are struggling actually to cope with a number of things that they're being asked to quote at the moment. And so definitely advice to clients as we go into Q3 is get your risk out there early. And the earlier we can get into the market, the more likely we are to be able to market the business and actually get better terms for clients.

So the markets may not offer quotes until 30 days before the renewal date, but the earlier we can get the submissions in, the work done with a client, for a client with the insurers, the better, frankly, because that gives us the ability to try and generate that competition in the marketplace.

So anything we can advise clients on what to do on information delivery. I mean, we talked a little bit around the non-tier one CAT in the first quarter or the non-modeled CAT that is outside of that. Still equally important, obviously, to come out with the right level of information and transparency around your risk action.

Absolutely. And the more detail you can give not just from a catastrophic perspective, but also from an engineering perspective, also from a supply chain perspective. These are all important things for clients. Similarly, as we've talked about in the past, we are starting as a result of social inflation to start seeing some movement from a point of view of casualty claims, particularly in North America.

The more we can give insurers confidence around what the claims that are going to come through, frankly, the better, and the more moderated we will see, I think, any change in pricing. But definitely get out there early, get out there with as accurate information as you possibly can. Spend the time to look at inflation, its impact on your values, on your claims history. All of those types of things.

Make sure you're modeling your risk appropriately as one of the things that we spend a lot of time building models to actually help clients actually analyze their risks, see what they should be retaining, see what they should be transacting into the insurance market. These are things that are hugely valuable at the moment. And if you spend the time, you will get a better result out of the marketplace.

Yeah. And especially on the inflation, I mean, you mentioned already. I mean, there's a lot of talk and a lot of questions around how you come to your new values, what you've done to actually make sure that inflation is in your values on going forward but also on limits and indemnity periods in the business interruption if you got it linking to the supply chain as you mentioned. So yeah, there's a lot to be done there. Any other market things we need to get across to our clients?

I mean, one thing I would mention is from a D&O perspective, I think we saw clients actually get happy with potentially buying lower limits on that side. And even though we've seen that pricing moderate, we haven't actually seen a lot of clients look to purchase more limit from a D&O perspective and that's continuing to put some pressure on some areas of the D&O pricing, which would be beneficial to the wider client group.

And we are starting to see clients potentially take some of the savings they might be making on the D&O side of things and think, is there more they could buy in the cyber space or across other lines of business? So I think it's really valuable if you're a client to think, OK, what is my total spend and then how best do I spend that money to protect all of the areas of my risk because if I've got comfy buying a particular limit, and I'm happy to bear that risk now, OK, are there other areas that I'm more concerned about, and I want to actually buy more?

And the earlier we can get into the market and think around what you're doing in that space, the better.

Yeah, that fits totally into the strategy that WTW is going a bit more into industry specialization, tailoring risks and tailoring the products that we have into specific industries or specific segments to get better product and differentiate as an insurance market to our clients in better products rather than standard products at a different price. Anything else? I mean, that's the market.

Anything out of our shop that you see either growing or I mean, we've talked about climate quite a lot. Anything you see there, which is notable to our clients?

So definitely-- obviously the modelling capability we've got within the business, whether it be from a climate perspective or from a point of view of cyber risk or ESG, all of these things are-- we've now built credible models in these particular spaces that we can help clients evaluate risk with. So I think that's very useful to clients and useful to us both from trading into the market but also thinking about how to advise clients what they should be-- what they should be doing from a risk perspective.

I think the next piece for us there is we're launching the broking platform across the business is, how do we make sure that broking platform is feeding directly into these tools so that we can offer that insight more quickly to our clients in the future? So I'm really excited where we're going as a business with regard to the broking platform, its connectivity with the models, and ultimately, its connectivity with insurers to look and see how we can press what is a very long value chain at the moment into something that is shorter and more decisive and hopefully, eliminate some costs for clients out of that chain.

Yeah. And that is what we're working towards. I mean, it is looking at-- I mean, avoidance of rekeying has been on the agenda for decades, and we're nearly there. We did the first test and actually works. So we're super proud to get the platform out not only from an efficiency point of view, but as you say also, getting the right data from our clients, analyzing them, modelling them and get a better risk profile out to our carriers to come out with a better product for our clients. So anything else? Or I mean, this is the high level overview that we try to get.

I think the last thing I would mention is I still think the treaty reinsurance market has the potential, at the end of the year, to drive some behavior from a-- I'm going to say causation perspective, so from a wording perspective that we might not have seen in the past. And, you know, obviously Monte Carlo is coming up in September. It will be very interesting to hear the mood music from Monte Carlo as to where reinsurers are thinking that they will go at the end of the year.

And we should be watching that very, very carefully because certainly from a client perspective, it's going to be vital that we inform them and we give them as much warning of either the positives or potentially some of the negatives that could come out of that. The particular area of concern still there is what happens from a cyber and a war perspective because with unfortunately what's going on with-- in Ukraine and Russia, and now the events in France, people are looking at those perils, the political violence perils far more carefully than they ever have done in the past.

And how those are worded, how the coverage is going to respond and react I think is-- it behooves us to make sure we're really up to speed on what's happening in the reinsurance space.

So can go either way. I mean, we did a little-- you did a little prediction last time around. And they said, well, the math would be [INAUDIBLE] up in a bit more relaxed market, which I think we see apart from, as you said, a couple of areas we're still concerned. So where are we next time we're sitting here? I mean, Monte Carlo probably done. Still smiling or is there something looming in the way that might sort of--

Did you bring my crystal ball with you? Look, from everything that we're seeing at the moment, I think markets want to grow, and we all of a sudden are being asked by markets, where's our firm order? How are we getting on with this? So I think they've got some budget pressures potentially coming through in Q3 and Q4. Normally, if those budget pressures happen, there's something that we can try and find to benefit clients out of that process.

So I think actually we might see a little bit more softening in the market as we go through Q3 and Q4. A lot of that will depend on what happens from the point of view of the catastrophe markets-- what happens with the wind season in the US at the moment. Particularly, that will have a big driver from the point of view of what we actually see through the rest of the year. But if we have a benign CAT season from a hurricane perspective, I think--

We should be OK.

We should be OK, and I think we'll start seeing a little bit of moderation from a rate perspective.

Yeah. And I just hope apart from that is that, again, as we try to get our products that we offer as an industry to our clients a bit more relevant into certain industries to, sort of, take the turn in the market to the benefit not only on getting a better price or a better deal for our clients but also get a bit more relevance into products that actually fit our clients in our industries better.

So with that, thank you for watching. We will be back at the end of the third quarter with-- well, looking back on the period we're entering now, but also a bit of a preview. As Swifty said, I mean, there's going to be some signs on how our year end renewal might come so keep an eye out for our next video. Thank you.

Thanks.

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Global Head of Broking, WTW

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