| Trend | Range | |
|---|---|---|
| Terrorism and sabotage | ||
| Non-volatile territories |  |
+5% to +15% |
| Some volatility and/or isolated events | |
+10% to +20% |
| Major volatility and/or widespread risk of major incidents | |
+20% to + 30% |
| Political violence | ||
| Non-volatile territories | |
+15% to +30% |
| Some volatility and/or isolated events | |
+30% to +50% |
| Major volatility and/or widespread risk of major incidents | |
+50% or higher |
Key takeaway: Rates continue to be impacted by major events in Chile, Hong Kong, South Africa and Ukraine. However, Q1 to Q3 2023 loss ratios have been much lower compared with more recent years.
Insurers continuing to pay some of the largest losses in the market’s history due to the crisis in Ukraine affecting the political violence market and other correlating war and political classes, but some loss settlements are coming in lower than initial reserves.
Multiple geopolitical and socio-economic concerns on the risk radar for insurers: Ongoing Russia-Ukraine Conflict, Taiwan Cross-Strait relations, potential global or regional recessions in 2023, global energy crisis, and increasing social inequality gap.
Some insurers mandating newer cyber exclusions with new “data” exclusionary language in addition to more traditionally “cyber-attack” focused language.
The crisis in Ukraine, the latest and most significant potential loss to the terrorism and political violence market in years, has ushered in changes mandated by treaty reinsurers.
- Insurers continue to push rate as they attempt to rebalance their books against increasing losses and treaty costs but attempting to balance this over a multi-year period rather than the sudden sharp increase, they saw on their 2023 treaties.
- Many midyear 2023 treaty renewals saw lower increases than their renewal in 2022.
- Coverage changes on treaty reinsurance programs include distance limitations for anyone ‘occurrence,’ increasing the potential for significant increases in retained risk for any dispersed event, such as nationwide civil commotion losses experienced in the United States in 2020.
- At this time, most insurers are not looking to push these reinsurance occurrence clause changes onto clients but will be factoring these changes into rates.
- Coverage changes directly felt by clients is the retraction in appetite for contingent and non-physical damage coverage, as well as limiting interest for binding multiyear programs.
- Potential for reactive pricing to quickly jump remains, either in specific regions due to varied and ever-changing security risk environments or globally in case of further catastrophic loss events.
Overall market capacity has not dramatically changed but expectation for actual reductions in line size deployment on individual risks.
- Overall theoretical market capacity has not dramatically changed post-treaty renewals, but actual reductions in line size deployment on individual risks – on average 40% more carriers required in 2023 to complete the same placement from previous years, especially in high-risk territories, heavily aggregated locations, and for policies with wider political violence perils.
- Insurers reviewing aggregation models for strikes, riots and civil commotion due to recent events, coupled with reduced aggregate availability and greater “per city” retentions following treaty renewal.
Disclaimer
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
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