So as we head into the last quarter of the year, Fergus, how has the market been performing in terms of pricing, coverage? Has there been any regional variation? What's going on?
FERGUS CRITCHLEY: Thanks, Jo, and great to be here. So we're certainly seeing a softening market at the moment, with some regions dropping off dramatically on the back of significant rate increases in prior years.
And now with a lack of some claims activity, we're certainly seeing some drop off in rate. This is actually exceeded expectations. We saw a softening that began about 12 months ago. And it's certainly picked up pace in the last few months. Many insurers are actually not currently meeting their business plans for 2025. And so we actually expect to see some opportunity to be had for our clients as we go into Q4.
There is certainly some regional variations, as I mentioned before. There have been recent civil unrest, losses, an event in Asia, where we've seen events in Indonesia, the Philippines, Thailand and others. And then also in Africa, in the DRC and also in Madagascar.
And so right now, while there has been only a few claims into the terrorism and political violence market at present, we could see some restrictions coming into the property placements, ultimately meaning that will be more demand in the standalone terrorism and political violence market in the upcoming months.
JO HOLLIDAY: Great. Thanks, Fergus. And I know that a bit of a theme over the last 18 months to two years has been some new capacity coming into the marketplace. I mean, I think we saw a very minor contraction post Ukraine and Israel, where we were expecting a little bit more contraction, but we really didn't see that coming. And now we have a further expansion of capacity in the market space. Are we likely to see that trend continue over the next quarter as we head towards the end of the year and new capacity potentially coming in for next year?
FERGUS CRITCHLEY: Yeah. So actually new capacity. As you note, there's been a huge amount of new capacity come into the market. But it's slowed in recent months, but there's still an abundance of capacity there to place all but the largest placements with a lot of competition on the program.
It was actually expected, like you noted, that we might have seen more market dislocation and more markets drop out of the market after the losses of the last five plus years, notably in Chile, in the US, in South Africa, Ukraine and Israel, just to mention a few, although there's been, of course, losses elsewhere as well.
But actually, we've seen new capacity come in and more than replace that lost capacity, with expectations of a softening treaty program, which most of our carriers have treaty renewals as of 1/1. And so with those expectations of a softening treaty market, we don't see any exits on the horizon for the market.
That said, new capacity coming in. Yes, there are certainly some traditional property carriers and also other specialty insurers that are looking to broaden their offering to their clients and look for opportunity for growth. And so there could well be some new capacity entering the market at the start of next year.
JO HOLLIDAY: Great. Thank you for that. And I suppose with that landscape and that of capacity movement and treaty renewals, what advice would you give clients on placement strategy if they've got a renewal between now and the end of the year, or 1/1?
FERGUS CRITCHLEY: Yeah, absolutely. So it is very much a buyer's market. This is the time to be looking at coverage. Maybe you've had previously reduced or removed extensions and also, actually thinking about potentially moving forward your renewal date if it's in early 2026 with opportunity right now in Q4. And especially before the 1/1 treaty renewal, there is opportunities to be had.
And therefore, actually potentially you would like to cancel and replace your program to actually get into 2025 before ultimately those treaty renewals happen. And insurers might go back to status quo for the next nine months after that. And so there's definitely those opportunities as well.
There's also opportunities to review alternatives to non-compulsory government-backed pools. There can be savings to be had by creating bespoke programs that don't sit as of a one size fits all, which is ultimately what some of the government programs look like.
For clients as they're thinking about the placement strategy specifically, get into the market early with as much quality risk information as possible. And then make sure you're talking to your broker about the utilization of analytics.
It continues to drive improved understanding of both coverage and limits that are required. And given the fact that there has been a significant evolution of risk for our clients, not only as of a first party, but also third party. Think about their supply chains. Think about globalization.
Those analytics help, really, to be able to help pinpoint where ultimately you've got risk around the world. And to be able to look at maybe redeploying some of that rate relief that you're seeing and the savings to buy more primary coverage for uninsured losses, such as political violence. So up to war coverage. Active assailant, for example. And also broadening to provide that coverage for things like supply chain or contingent business interruption.
JO HOLLIDAY: And I think that's probably an interesting point for clients who currently don't buy on a standalone basis as well. Now might be a good chance-- a good time in the market to do that bit of analytics, to see whether that's the right time to enter into the market based on their exposures. So in terms of the U.S., Fergus, we've got the Terrorism Risk Insurance Act (TRIA) coming up for renewal in 2027. Any thoughts on how that might play out and how our clients might need to prepare for that?
FERGUS CRITCHLEY: So I would certainly not dive in to providing certainty on what the U.S. government may or may not do in the coming months and year or so ahead. But it certainly seems like the focus of the Treasury department, and also the TRIA Risk Advisory committee, is firmly on the emerging and escalating threat of cyber.
And so while the terrorism risk insurance program is absolutely critical for the insurance industry, the early indications are that TRIA should renew without major changes. That is the inside track at the moment. But of course, we are planning for all eventualities.
And as a result, we are advising and actioning on behalf of our clients, instructions to lock in three-year policy terms where appropriate. And of course, being able to utilize the softening market at the moment in order to be able to do that.
It means that we can then lock in that critical capacity in case TRIA does in the end not renew or has major changes to it. And so that's been a really important piece. Just in case. And it's been the same in the previous iterations of TRIA renewals that we've had.
We've had one that non-renewed for a number of days, and we had one that renewed over a year out. And so yes, we've got to be always thinking about the potential eventualities, or what might happen with this program.
JO HOLLIDAY: Yeah, absolutely. And giving our clients, making sure they've got that period of certainty around that renewal so they know what cover they've got or haven't got. So thanks for that, Fergus. And finally, I think this is my last question to you, Fergus, is it's been really good to see some Ukraine capacity coming available.
And I know that we've seen a significant recent uptick in successful placements for that PV and war there. What is it that we really need from the market to support our clients at the moment that have got operations in Ukraine?
FERGUS CRITCHLEY: Yes, absolutely. So the market has certainly seen some new orders from Ukraine in the past six months. Often, though, for small limits, under $10 million And it's great to see that the terrorism and political violence market is bringing solutions to more than the odd risk in the country. But that said, we certainly need to see more support from our private insurer partners to be able to make insurance available to everyone in the country.
We are also advising and really pushing insurers to be able to support Ukraine in the discussions around a wider insurance private public partnership for war coverage in the country. So essentially, a government pool or some sort of private public partnership. As private insurers, we'll be absolutely critical in creating a sustainable program and a sustainable insurance environment for the country.
JO HOLLIDAY: That's great. It'd be great to see the public-private partnership develop there and bring some solutions for our clients. Thank you very much, Fergus. I really appreciate your contribution to this episode of the Marketplace Insights podcast, and hopefully we'll see you on the next one. Thank you very much, everyone.
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