ALASTAIR SWIFT: Come up with something that is different for our clients. It isn't all about price. If you can come up with something that is innovative, that is different, that is going to create true value for clients, it's going to pick a bit of risk that they're not transferring into the insurance market and see whether you can capture that. That's the stuff that's going to really make a difference for you as a market.
SPEAKER 1: Welcome to Global Marketplace Insights by Willis, a WTW business, a podcast series sharing the latest trends from the specialty and regional insurance markets.
SIMON DELCHAR: Hello, and welcome back to the Marketplace Insights podcast series. I'm Simon Delchar, Global Head of Placement for Willis. And I'm delighted to be joined today by Alastair Swift, otherwise known as Swifty, CEO of Willis UK and Global Head of specialty, and Neil Harrison, Global Head of claims. Swifty, when we spoke last quarter, we talked at some length about the underwriting community and their desire for growth. Have you seen any change in that in the last quarter?
ALASTAIR SWIFT: Simon, only just to say they're probably even more aggressive than they were with what we saw last quarter. I think there's a lot that haven't quite hit the growth targets that they were looking for as they went through this quarter end. And I think they're going to continue to have that ambition through the end of the year. Certainly, from what I'm seeing at the moment, I think that hunger is definitely there across the market.
Whilst the combined ratios are where they are, whilst you've got reinsurance costs going down, you've got yields going up. I think they're going to keep pushing for top line revenue growth because they've got an ability to be able to absorb the decreases that are coming through from a rating perspective.
SIMON DELCHAR: There are pockets, I guess, where the market is not in such freefall, if you like. I think D&O seems to be slowing down. Cyber seems to be slowing down. Aviation may be flat, depending on who you talk to. And, of course, US casualty. I saw that Everest came out with some comments the other day about the future of US casualty and whether it was indeed sustainable to be insured going forward. Anything to add to that?
ALASTAIR SWIFT: Yeah, it's interesting. You run through all of the markets. At any given time, we're going to have pressure points somewhere because there'll be lots of activity, or claims inflation, or a lack of capital because of someone pulling out. And it will hit a specific area of the market. And when we talk about this hunger for growth, it's more when I say across the broadest spectrum of insurance and underwriting that we're seeing.
There are still going to be areas which are going to be tougher than others. But I think even in some of those areas that we've talked about, aviation is an interesting one, right? We still see, even after the war, losses that have come through, some reduction in war rates coming through. On the marine side of things, there was lots of chatter around the marine war rate changing, but it didn't really happen. That was people mouthing off about what was happening in the sector versus getting into the detail for specific clients because most war covers are placed on an annual basis. And you have to issue notice if you want to change the pricing. Well, that didn't happen. So, the market will constantly try and talk up areas of the market. And they're going to keep talking about areas that are stressed and under distress. And then there's the reality of the commercial environment that we're in, which is potentially slightly different. And it only takes a little bit of overcapacity for rating to come under pressure in any of those areas that you mentioned. And that's the fragility of supply and demand, and a little bit of oversupply, and funny, old-world pricing comes under some pressure. So, one of the things we've been encouraging everybody to do is just because something was like this last week doesn't mean it's like that this week or it's going to be like that next week because it is going to shift and be pretty vibrant. But underneath it all, the insurers have got a desire for growth through the cycle because they're still in a pretty good place from a overall market condition perspective.
SIMON DELCHAR: Which makes it very difficult to navigate as a broker because you just don't know- there's no consistency in the market. One day, as you say, you'll get one result. And the next day, you'll get a different result. So finally, the bottom of that market is very, very challenging indeed. Neil, if I can bring you in. So, the market is generally softening. Are you seeing any different behavior from insurers on the claim side?
NEIL HARRISON: I would say not yet, Simon, to be honest with you. I think there's often a discussion. When the market tends to soften, does it get easier to deal with the claims situation? And I would say we're not seeing that at this point. I think we are still seeing, as we did in the first quarter of this year, and we talked about this in the Q1 podcast, a lot of challenges around claims. Some of that's driven by the geopolitical environment, some of it's driven by the social inflation issues, and so on and so forth.
We are still seeing a fair amount of complexity and challenge around even simple claims, to be honest with you. A lot of lawyering up and so on and so forth. So we're not yet seeing some of the theoretical benefits in the claims space that do come from a market time like this. I think you've already alluded to the aviation issues. The conversation around US casualties segways quickly into social inflation. Those macro factors are still there.
So as Swifty said, whilst insurers are looking for growth and there are elements of the market that are softening, some of the bigger macro topics still drive the level of challenge on the claim side.
SIMON DELCHAR: So, are you seeing insurers generally be more receptive, if that's the right word, to claims in terms of their first move on a claim? Is there a change in attitude there? Because they are under more pressure. And from a placement perspective, obviously makes sense for us to trade with those markets who respond in the most appropriate way when a claims notification comes in, if you like.
NEIL HARRISON: Look, I think there's still some push-pull in the market, right? I don't think that most insurers are rushing towards us with settlement offers. But I do think some are more receptive than others when we, on behalf of our clients, reach out. We are pushing very hard, frankly, as we always do, for interim payments and advance payments. We're pushing very hard for quick coverage decisions so that the volatility comes out of the conversation. We recognize there are still complexities around the conversation on quantum that has to go on. But again, I do think that markets are starting to show differentiation, some coming to the table and some not. Again, it's not a one-size-fits-all answer. It's not all lines, and it's not all geographies. But there are some that are, to use your phrase, Simon, more receptive than others. The encouraging thing for us as well, and obviously the three of us and others driving this as well, is that clients increasingly are asking us for insights on the claim performance of insurers as they select markets, right? And I know all of us, along with issues of premium, and financial stability rate, and terms, we would all encourage that because I think at the end of the day, I hate the phrase, but the claims is where the rubber meets the road.
SIMON DELCHAR: Yeah, I think it's the ultimate differentiation. Essentially, it's the service, the ultimate service, that our clients buy. And if markets don't perform on claims, then what's the point of everything else, frankly? Another point of differentiation, as you quite rightly say, is price. Swifty, what about other areas of potential differentiation? Claims? Pricing? Is that it, or is there more to it than that?
ALASTAIR SWIFT: Frankly, claims, in my mind, has always been the most important in there. And I agree with pricing, but I think you've got to have coverage that is going to start coming in to bear. You're going to have actual service standards just in general, ease of access. And the other area that I think is vital for insurers is actually to take us seriously when we talk about what they need to do, right?
Certainly, one of my big frustrations at times has been insurers ask us how they can grow with us. And we tell them, and then they totally ignore it. Well, maybe listen to the advice that you're being given is definitely one of the things. And then, similarly, I'd ask all our colleagues, push our insurers to come up with their best terms first, right? Because they will lose out if they constantly try and play the game in this marketplace. This isn't the marketplace where you can afford to play a game as an insurer. You'll just get left behind.
So, I think that's very important for us to make sure we're messaging to markets. And then finally, come up with something that is different for our clients. It isn't all about price. If you can come up with something that is innovative, that is different, that is going to create true value for clients, it's going to pick a bit of risk that they're not transferring into the insurance market and see whether you can capture that. That's the stuff that's going to really make a difference for you as a market.
And then finally, breadth of offering, I think, is really important for them too, right? Because lots of our clients are looking and saying, ok, they want to see insurers involved in more than just one area of their insurance. And as they think of their spend, they want to aggregate it with those people who they think are good claims payers, are innovative, do provide good service, are going to be flexible around what they do from a coverage and excess point perspective, and are here to stand the test of time.
So we don't talk about it enough, but the financial stability of an insurer, actually, when we're thinking of longer-tail businesses, is vital. And we see these plethora of MGAs that are popping up day in, day out at the moment. Great, right? And fantastic. But are they going to be there in five years' time when you've got a difficult claim to settle? Let's see, right? And I do think that's a big issue for us. And we need to think of those insurers that are going to have longevity when we think of our clients, too.
SIMON DELCHAR: And I think, on average, the average claim for an MGA takes twice as long as an open market claim. I think just before we close, it would be remiss if we didn't talk about geopolitical events. Neil, have you seen any claims activity yet? Have you had anything reported as of yet, or is it a bit too early?
NEIL HARRISON: In some ways, too early. But if we take a quick step back, and you guys have alluded to this already, in some ways, the most noticeable claims topic arising from the geopolitical environment has been the UK High Court decision on the aircraft leasing claims and everything that followed on with that. For people who aren't aware, aircraft leasing firms won a multi-billion dollar lawsuit against insurers related to aircraft stranded in Russia. And basically, liability was moved, or the responsibility was moved, from all risk insurers to war risk insurers.
What that has done has triggered a lot of questions about how war risk exclusions apply in other risk classes. The advice that I think we would always give there is read the policy, understand the policy, and talk to us about what your wording actually means. Again, as I said earlier, there's no-one-size-fits-all answer. I think, Simon, the other geopolitical component in claims world right now, sanctions. Still an issue. Still a frustration.
I think insurers, and council, and sometimes us can do, perhaps, a better job in explaining to clients what the sanction's issues really are, and not allowing one sanction issue on an overall claim to get in the way of broader progress. You can progress the rest of the claim with the sanction issue as very much to be resolved later when the environment allows. So, sanctions is still out there. Tariffs, if you think of tariffs as a geopolitical issue, which I think many people would, we haven't seen the complexity yet, but we know it's coming. The issue of tariffs and the volatility in tariff rates is definitely going to complicate business interruption conversations as we go forward. How do you value a claim on any particular date given some movement around tariffs? That's going to be an issue. And again, if you spin from that a little bit, there are definitely increased costs of claims associated with the global supply chain, parts, labor, particularly, perhaps, steel, timber, glass.
They're the three primary components of that. So, values are going up. And you can certainly draw a line all the way back to geopolitics as the macro that sits behind all of that. And global interconnectivity as well. I think we're all now realizing it's very clear something happens in country number one, that has a domino effect around the world on our clients. And understanding that supply chain issue and everything that comes with that is increasingly important.
Linking back very quickly, too, I would say, on the insurer side, the expectation as we think about this complex environment, just like we promote specialization, we need insurers to be equally specialist and understand the clients that they are writing with us. And again, that's important at the placement time. But again, another area of claim differentiation I think for the insurer community is to put specialists with specialists and understand not just here's the four corners of an insurance policy, but what does this mean to the client's business, industry, segment, and have some of commercial empathy, frankly, with the person on the other side of the table.
SIMON DELCHAR: Swifty, have you got anything to add on the geopolitical environment?
ALASTAIR SWIFT: I think Neil covered most of it. Actually, the one thing I did want to say is for all of our colleagues who don't believe necessarily what you read in the insurance press, speak to your colleagues around the world as to what is actually going on versus what you're reading in the press because there are some quite misleading articles out there around what's happening with rates, what's happening with capacity, and what's happening with losses. Go find your specialist internally. We've got loads of them.
We've got great people within this company who have their finger on the button of what is going on around the world. And use them. And don't rely on the insurance press for your up-to-date information that you're giving to clients, particularly around these types of issues, because they change on a daily basis. And the moment that article is printed, it's out of date.
SIMON DELCHAR: And we're back to where we started, really, as well, Swifty. It's an opportunity for growth for insurers as well. So, gentlemen, Neil, Swifty, thank you very much for your contribution on this episode of The Marketplace Insights podcast.
ALASTAIR SWIFT: Thank you, Simon.
NEIL HARRISON: Thanks, Simon. Thanks.
SIMON DELCHAR: See you next time.
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