For nearly two decades until mid-2018, the insurance sector enjoyed what is termed as ‘soft’ market conditions. During this period, clients grew accustomed to seeking and receiving premium reductions from compliant brokers and underwriters, all striving to maintain their market share.
However, a shift occurred thereafter. Decreases in market capacity, coupled with significant losses in catastrophe and reinsurance markets, impacted the profitability of many underwriters. Shareholders demanded swift returns to profitability, marking the onset of a ‘hardened’ insurance market. This transition resulted in premium increases and more restrictive policy terms, as underwriters exhibited reduced appetite for riskier business classes to meet shareholder expectations and respond to reinsurers’ tightening terms.
The onset of the Covid-19 pandemic in early 2020 exacerbated these challenges. Many underwriters began resisting coronavirus-related claims, citing reasons such as the pandemic not being factored into their rating models, potential industry bankruptcy, or policy wordings not covering such events.
Consequently, numerous legal actions have been initiated against prominent underwriters to recover Covid-19 losses under policies not designed for such coverage. There’s growing public and official pressure for the insurance industry to contribute to the financial losses incurred due to Covid-19, advocating for shared responsibility in aiding national economies’ recovery.
Regardless of the outcome, the pandemic is expected to cause record losses across the global insurance industry. This will likely lead to a further realignment of capital in insurance and reinsurance markets, with the market ‘hardening’ even more. The upcoming insurance program renewals promise to be notably challenging compared to previous expectations.
In this turbulent landscape, few brokers possess sufficient experience to guide clients through these challenges. Sovereign Insurance Services (SIS), however, boasts such experience within its ranks, alongside access to international market resources to mitigate potential adverse impacts on clients’ businesses. Leveraging its substantial international market presence through the Sovereign Group client base, SIS stands ready to assist clients in navigating any looming challenges.
For all current and prospective clients, now is an opportune time for an unbiased assessment of corporate and personal insurance programs. Many insurance programs may have been allowed to renew without proper review, despite significant changes in business models, profiles, and insurance market dynamics. SIS offers complimentary insurance reviews and provides clients with the guidance and support needed to navigate the critical period ahead.