Opportunities and challenges in the insurance industry
Lucy Clarke, President – Risk and Broking for Willis (a WTW business) sits down with Sam Harrison, Group Chief Underwriting Officer for Canopius to discuss the evolution of the insurance landscape, the current state of the market, innovation in the industry and his perspective on the remainder of 2025.
LC:
Hi Sam, thanks for spending some time with us ahead of RIMS to talk about the market and the trends you are seeing and anticipating.
Let me start by asking you to give us a general overview: how have you seen the insurance landscape evolve over the past few years?
SH:
During what was the post-covid rising market, one of the dominant themes was that we could underwrite to the structures, and with the prices that we wanted. Brokers were inclined to structure deals that were suited to individual carriers. That meant that for the clients’ core markets, the overall pricing was acceptable but if you were an underwriter, there were areas of the program which one would regard as being very well paid. Those discrepancies and opportunities are being lost as a result of more capacity entering the market and standard structures being able to be placed for far more of a given program. This combination of additional capacity and growth in index facilities means that that there are fewer opportunities to find those well priced niches. Of course whilst this is a challenging environment for us, it is a good one for clients.
Another post-covid change is that brokers have significantly reduced the amount of face-to-face meetings between clients and underwriters under the auspices of efficiency - they have been replaced by large market meetings held remotely, with some additional individual in-person meetings (usually the placement leaders). This does make it more difficult for challenger markets, like Canopius, to try and demonstrate the value of their proposition directly to our clients (which is why I find it particularly irksome!)
LC:
Where do you see opportunity within the market to drive innovation and new solutions for the client base?
SH:
When people talk about innovation, I feel they are largely referring to technological innovation. But I would say, if we’re talking pure innovation, the London market innovates on a daily basis. For example, one of the current innovations that will have the most impact on clients is the rise in index/broker facilities. The client complaint I hear the most (normally in a hard market) is the frustration that the last twenty percent on a placement can change an overall price to the client, and that the last twenty percent can take as long to place as the first eighty. Index facilities, for good or bad, provide clients with a better likelihood of completing on leader terms and improves the speed of completion. In terms of technological innovation, algorithmic/digital underwriting is a fantastic innovation, but writing a book effectively is aided by homogeneity of risk – so dependent is this style of distribution on pricing models. Most of the business we see in London is here because it is not homogeneous, so it is only appropriate for certain segments of the market.
LC:
Is there a line of business that you feel most comfortable with from a rate perspective? Where do you see the pricing as more of a concern?
SH:
Firstly, I don’t think seeking rate adequacy is a particularly effective business strategy; it merely looks at the probability of whether you are charging enough money for your portfolio using your own history and market-level data sets as your guide. For example, I am sure people who were writing North American casualty over the last ten years would have thought at that time they were writing at acceptable rate adequacy (and of course some were)! I think rate adequacy is a vitally important guardrail and sense check, but good business strategy starts with what products you want your company to be known for, what value propositions are constructed for those products and how we deliver those promises to our clients. If this strategy is well designed and you are prepared to flex it for pricing cycles the portfolio should deliver profit.
In terms of where rating is currently, we have of course seen significant drops in the property portfolio, but absolute rating remains adequate but not necessarily adequate enough to significantly grow it. Conversely, we have a smaller North American casualty portfolio, and I would feel comfortable growing that in the prevailing rating environment.
We will continue to write the products and industries where we want to be globally significant, but in response to an overarching market softening, we will be shrinking writing in other areas.
Finally, I am a believer in the adoption of indexation facilities – if those facilities are properly administered and are creating balanced rate adequacy across the portfolio.
LC:
What do you see as some of the biggest challenges in your portfolio today?
SH:
We have a large cyber portfolio which we are looking to continue to develop.
The thesis behind the class is that cyber is an undersaturated market, and the number of buyers will grow each year. We don’t see that to be the case this year.
One theory is that insurance is still relative expensive and cyber is today still considered a discretionary spend and in these turbulent times, companies are not looking to increase their discretionary spend. This has meant that competition in the cyber market is fierce, so that is a big challenge.
Another challenge is that the US economic policies, if they are executed the way they are envisaged today, will add punishing claims inflation, particularly on short tail lines.
LC:
How would you describe Lloyd’s position in the global insurance market compared to other major global insurance markets?
SH:
Lloyd’s is in an excellent position. It has transcended from being an important market trading hub for multiple carriers and become a word to describe the whole London market ecosystem of specialty insurance.
Lloyd’s has done an amazing job and even Singapore which is a very well-regarded regional insurance market itself also has a healthy Lloyd’s hub.
Of course we have strong markets in all geographies, particularly in the largest insurance market in the world, the US. But Lloyd’s is a single hub for many carriers, with a dense population of knowledgeable underwriters with technical understanding of our business and broad experience of different industries. Underwriters do follow people they consider to be technical experts, albeit everyone maintains a strong opinion(!), and it is difficult to replicate this environment in other global markets.
LC:
What trends do you see shaping the future of the insurance and reinsurance industry?
SH:
I think the trend of non-insurance capital into the market is a significant development. That capital isn’t interested in the nuance of a particular risk or a particular sector but is just bringing capital to the market. I’m not saying that’s good or bad, it is just a trend that will shape the industry. For 300+ years, investors in Lloyd’s have been interested in investing to insure risk but the new capital is just looking for returns and investing across the spectrum to achieve that.
I also note trends of reinsurance capital seeking new markets to access. This includes the growth in the use of fronting companies to change insurance into reinsurance - just look at rise of MGA capacity being sourced from the reinsurance industry in the US rather than insurance carriers. It will be interesting to see if this appetite will last across a complete market cycle.
LC:
As you look into 2025, what can our readers of Marketplace Realities expect to see from the market?
SH:
Well, you have seen the general results from the carriers. We have done well and most of us are going to want to continue to grow our profile and market share in most business lines, so I am sure there will be some lines that show some softening. However, our clients will also see more innovative distribution efforts and so they will have more options for risk transfer than they have had recently.
Obviously one big unknown is what the impact will be of the economic policies that will be implemented by the new US administration so we will all be watching that carefully as that could have significant impacts for carriers and clients alike.
LC:
Sam thanks for spending time with us today, and hope you enjoy RIMS.
To read more, download the full report below.
| Title | File Type | File Size |
|---|---|---|
| Insurance Marketplace Realities 2025 Spring Update | 12.7 MB |
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