North American perspectives
What do you think the challenges of the 2022/2023 renewal season will be?
Our North American perspectives article gathers views and perspectives from your side of the Atlantic. For this edition we reached out to insurance specialists to get their view on what they think the challenges of the upcoming renewal season will be. The contributors are retail and wholesale intermediaries based in the US.
Wholesale broker perspective
The pandemic amplified several vulnerable areas for our industry and will continue to challenge us to deliver more value to our customers. In coverage placement, challenging lines of business continue to be Cyber, Property, D&O and Emerging market risks such as cannabis and crypto currency.
We are experiencing capacity restrictions for property with lower levels of participation from carriers, especially in CAT prone areas. While cyber has settled into manageable state of chaos, we still see capacity and placement restrictions for some tougher classes. Our customer is generally in the SME space, and we are starting to see the effects of wage and benefit increases on hiring and payroll. This along with rising raw material costs, supply chain and rising inflation results in larger than anticipated premium audits for many of our clients. When coupled with large renewal increases, even for loss free risks, the renewal process is more challenging. Many clients are requiring that we shop aggressively to multiple carriers and options.
Technology continues to be the game changer, with telematics, AI / chatbot features, sensors, drones in the claims process leading the way. Carriers and brokers are scrambling to implement new technology aimed at delivering products and services more efficiently to an increasingly savvy customer. Due to resources, most brokers need to rely on their carriers and third parties to assist in the development and deployment, especially as we use internal resources defending our own firms against cyber and ransomware attacks.
After technology, hiring and retaining talent remains as our highest priority. Most reporting suggests that investment in talent will deliver more value in a shorter time frame than technology alone. So, competition for talent is fierce across the entire industry. Even with all the advancements, insurance is still a relationship business and if given a choice, we follow people we know and trust from one job to the next.
For most in our industry, cyber risk continues to be the most systemic challenge followed by an uncertain economy and inflation. As brokers, we see this play out in real time as we look for solutions for our customers. To differentiate ourselves we must seek out and deliver a more advisory role to our customers, so they see us contributing an essential role in everyday operations.
Retail broker perspective
This commentary was written mid-September
The state of the reinsurance market is becoming a concern as rates continue to climb after a bizarre weather year and two difficult CAT years prior.
Hurricane season has been quite so far, but if some of the larger late season weather events occur and create significant losses, then the reinsurance market could see more pressure. Last year, the reinsurance market was buoyed by a late surge in investment in the space that stabilized capacity and pricing, but this year reinsurance markets may not be bailed out by the same levels of equity investment due to numerous negative global economic signals.
If we see a tightening in the reinsurance market, this will certainly impact the primary market – especially for the coastal habitational property market. We have already seen the inability to obtain reinsurance capacity cause problems for home insurance carriers in Florida and Louisiana, and Texas saw a significant habitational property MGA restructure.
Additionally, carrier appetite has generally diminished for coastal habitational properties, leaving some risks with very few options. As such, a heavy CAT storm loss season in the fourth quarter of 2022 could really make things difficult for an already challenging market segment.
A sadly pre-scient interpretation of major hurricane landfall - Miller editor.