UK Property and Casualty Insurance Market Update.

Marsh data indicates that the UK property
and casualty (P&C) insurance market is in
transition. The average rate change for Q1
2019 is largely consistent with Q4 2018,
but there has been a change in the trading
environment and achieving these results
has been more challenging than before.
Market conditions are changing quickly,
particularly in natural-catastrophe-driven
property, and large limit international
casualty. The changes in average rating
may be subtle but, when compared with
year-on-year rate reductions, they do
indicate a shift in the market.
Insurers are focused on rating adequacy rather than top-line
growth – new and increased premium income is important, but
not at the expense of profitability. There is also less evidence of
insurers taking a view on overall premium income with individual
companies; they are instead focused on technical underwriting
in each silo. This is a shift in approach and means that market
engagement strategy, market selection, and good quality
submissions are crucial to secure the best possible renewal.
The UK property insurance market is unpredictable and in
transition. Insurers are focusing on profitability and some are
willing to lapse renewals if rating is not adequate. This approach
may even apply when there is a wider or long-term relationship.
Insurers are reviewing their entire portfolio, and some insurers
are requiring immediate material change in rating for some
There are examples of rate reductions being achieved, but these
are rarely more than 10% and they tend to be for placements
with limited natural catastrophe exposure.
Follow and excess capacity continues to be in good supply.
So far, it has not generally been difficult to complete
programmes (except on waste and power), although it is
necessary to see a greater number of markets to secure capacity.
Insurers are focusing more on terms and conditions, with
non-damage cyber cover not readily provided and additional
premiums being applied. Contingent business interruption
sublimits are also being reviewed.
The facultative reinsurance market is subject to upward
pressure on rates, as Lloyd’s of London capacity contracts.
Natural catastrophe pricing is increasing and insurers are
passing on the increased cost of reinsurance.Casualty
Insurers continue to look for opportunities to increase rate,
but reductions are still possible for the right risk. There is an
increased focus on capacity deployment, policy terms and
conditions as well as an appetite for co-insurance support. Some
insurers are reducing capacity to £25 million, and will seek
ventilation in order to participate elsewhere on the programme.
In some cases, lines have not been renewed due to pricing
and, in order to ensure that coverage remains consistent,
restructuring of programmes is often required.
The Prudential Regulation Authority has set out new guidelines
for insurers assessing cyber risk, with specific consideration
to non-affirmative cyber risk exposures (that is, where cyber is
silent on a general liability policy). As a result, general liability
policies now contain a cyber exclusion to reduce the unintended
exposure to this risk.
The EU’s General Data Protection Regulation (GDPR) has also
been a focus for insurers, all of which are now sub-limiting
coverage for data protection due to uncertainties in the
frequency and severity of claims. It is anticipated that only small
sublimits will be available as this develops over the next year,
with casualty insurers increasingly viewing this as a specialist
cyber risk.
Long-term agreements are increasingly restricted (that is,
higher level referral is required before they can be proposed)
and some insurers are applying rate increases in the second
year, instead of maintaining a flat rate or flat premium over the
period of the agreement (however, there is greater flexibility
for new business). This is already an accepted practice in the
international casualty market, and indicates that insurers believe
the market may be subject to further upward pressure on rates,
and greater scrutiny of terms and conditions.
UK Property and Casualty Insurance Market Update. UK Property and Casualty Insurance Market Update. Reviewed by E on January 30, 2020 Rating: 5

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