Insurance Market Overview 2023
The challenging backdrop to the 2023 insurance market includes inflationary pressures, the looming threat of recession, continuing fallout from Russia’s invasion of Ukraine, and lingering COVID-19 concerns. Rising reinsurance rates are also contributing to market hardening while adding to primary insurer operating costs.
Property / BI
The capacity reduction which has characterised the property insurance market over the past few years shows no sign of alleviation in 2023.
Reinsurers are continuing to increase rates and/or reduce capacity, meaning additional cost to the insurer, and ultimately the Insured. A perfect storm of inflationary pressure in the construction industry means that many businesses’ property risks are currently underinsured.
A periodic professional valuation of buildings and plant to provide an accurate reinstatement cost assessment for insurance purposes should be carried out.
Underinsurance can have disastrous consequences for any business suffering a major property damage claim, as their insurance will not fully cover the loss, threatening their ongoing viability.
Inflation is pushing up claim payouts, including loss of income costs, as wages increase. It’s also driving up the cost of legal and other services. Liability claims inflation continues to exceed the underlying Consumer Pricing Index rate and insurers are generally aspiring to rate uplifts of around 10% to keep pace.
There are indications of a hardening of the motor insurance market. The drive towards new vehicle technology continues to put a strain on the UK’s repairer network. Global energy and supply chain issues are increasing the cost of parts, labour and replacement vehicles. These pressures are driving up the cost of reinstating vehicles to their pre-damaged state and adding to the cost of liability claims for damage to third-party property and personal injury.
Cyber Liability / Crime
Price increases continue – the extent of which varies by risk complexity and year-over-year improvement of cyber controls. Underwriting robustness remains high and keenly focused on minimum information and operational technology security controls. For example, insurers are likely to decline a risk where IT users do not have multi-factor authentication in place.
Threat actors appear to be moving away from attacks on larger organisations that may result in greater scrutiny from national governments or law enforcement. Instead, they are looking to target companies operating in the mid-market space.
Directors & Officers
Market conditions are more favourable than they have been in recent years with rate increases more aligned to inflation. Greater insurer appetite and increased competition has provided more alternatives for insurance buyers. Risks in challenging sectors (including North American exposures), or with governance or financial concerns continue to experience tougher market conditions.
There is an ongoing focus on ensuring excess levels are at appropriate levels, and insurers are looking carefully at coverage, restricting cover in certain areas (fire safety/cladding is still under the microscope). Several insurers have indicated increased capacity for 2023 and new entrants to this market are anticipated.
After a painful period of correction, premium rate increases have eased with typical rate increases between 5% and 10% for non-distressed/attractive Professional Indemnity risks. There is an ongoing focus on ensuring excess levels are at appropriate levels, and insurers are looking carefully at coverage, restricting cover in certain areas (fire safety/cladding is still under the microscope). Several insurers have indicated increased capacity for 2023 and new entrants to this market are anticipated.
As ever, the advice and market knowledge of an experienced broker is the best tool to ensure your business is fully covered and getting the best possible deal on your insurance. At Digney Grant we have one of the most experienced teams of insurance professionals in the local market, an in-house risk management advisory to actively help you reduce and mitigate your risk profile and the backing and buying power of one of the world's largest insurance networks - Brown & Brown.
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