Paris, September 13, 2021 — Gras Savoye Willis Towers Watson presents his analysis of the evolution of the insurance markets for 2022 at the Market Conference.
The health crisis has amplified the hardening of the insurance market, leading at the same time to adjustments (tariffs, guarantees, risk coverage, etc.) in the various branches. Therefore, it is necessary to understand the difficulties in a very contrasting and ultra-competitive insurance environment and be able to detect the opportunities offered by these developments.
“What impacts the market the most is the unpredictability of the world, which is increasingly heckled by new risks that are underestimated or difficult to model by insurers. The competition will gradually return to short-term risks (damage, transport, all site risks, etc.). On the other hand, uncertainty weighs ever more heavily on long-term risks, still penalized by the persistently low-interest rates. The palm goes to the Cyber risk, which is at the insurable limit. There will be a learning phase to understand the issues better, distinguish between good and bad risks, help customers improve their levels of protection, find the right balance between transfer and retention, the right premium levels”, observesJean-Christophe Lapeyre, Markets Director, Risk Analytics Director of Gras Savoye Willis Towers Watson.
Corporate Risk Broking market trends:
“The epidemic has crystallized the main parameters of a recovery initiated in 2019.”
“The crisis has had a major consequence: insurers have clarified their contracts by checking the guarantee and exclusion clauses to avoid vagueness around guarantees such as operating loss without damage,” observes Jean Rondard, Co-director CRB at Gras Savoye Willis Towers Watson.
Property and Civil Liability: In Property and Casualty, we are seeing overall price stabilization. However, the closure of Property and Casualty subscriptions in Paris by several insurers, the systematic exclusion of certain guarantees from coinsurance contracts such as operating losses without damage, risks related to a Pandemic, and Cyber dangers for which it is advisable to switch to specialized policies. For 2022 renewals, creativity in guarantees is no longer accepted by the market.
The Civil Liability market remains tense with complex renewals resulting in capacity reductions, additional exclusions, increased deductibles, and budget increases.
Construction: The trend in the construction insurance market remains stable with a tightening despite the appearance of new players. 2020 was marked by an overall drop in the inactivity of 15.2% and 22.5% in new buildings. An improvement in the situation is expected in 2022. Overall, no major upheaval is expected, but continuity in the effort to return to profitability.
Captives: In a context where the insurance market is getting tougher, leading to a questioning of programs in terms of premiums, deductibles, guarantees, etc., interest in alternative solutions is growing. This should continue with the implementation announced by Bercy of an equalization provision which would allow reinsurance Captives to pool, beyond the risks, the years of underwriting, thus offering the ability to build up reserves for significant risks. The use of reinsurance captives has become an essential lever for substantial risks.
Cyber: With an explosion in claims and corporate exposure since the start of the health crisis, premiums on this branch have drastically increased during 2021 renewals. The theoretical capacity of the market has contracted and rose on January 1, 2021, to €150 million. Several insurers have already temporarily suspended new business underwriting to restructure their Cyber underwriting strategy effectively.
One of the highlights in the Cyber insurance market during 2021 was the decision of insurers to apply a sub-limit on all guarantees related to a ransomware attack and the introduction of a co-insurance clause between the insured and the insurer. This branch’s constant decline and supply adjustment risk destroying interest in this cover, which has become essential.
Affinity remains less affected by market tensions.
The renewals in affinity on January 1, 2021, were marked by the consequences of applying the DDA (Directive on the Distribution of Insurance), particularly in terms of redistribution of value between insurer and distributor. The affinity insurance market is attracting more and more insurers with very diverse profiles: traditional insurers, bank insurers, and Insurtech. Both the prices and the guarantees are rising to adapt to everyone’s needs.
“The health crisis still had an impact on the cancellation guarantee clauses. From the start of deconfinement, subscriptions to Cancellation Insurance were summarized with the almost systematic exclusion of Pandemic and Cyber risks from contracts and significant price differences. Says Eric Demange, Affinity and Specialized Markets Director.
We are also witnessing a tightening of underwriting policies. The sports and leisure sector, subject to numerous regulatory restrictions in 2020 and 2021, is struggling to restart. The seasons and certain major events have been postponed to 2021, and the calendars are densified to allow partial catch-up. Therefore, the leading players in sports have approached this year in a troubled economic situation that will persist in 2022.
Health & Benefits (H&B) market trends:
“An agitated situation, with no transition phase”
Between the relative decline in health benefits due to confinement and the increase in personal risk claims, insurers will be more cautious and more observant in 2022. Eventually, some customers in the medical sector or hotels/cafes/restaurants risk being challenging to insure. This is why it is now necessary to resort to engineering by setting up, for example, co-insurance, reinsurance, or a Captive.
“Currently, Human Resources Directors and Compensation & Benefits Managers are very mobilized on issues of reorganization, but also well-being, Quality of Life at Work (QVT) – Psycho-Social Risks (RPS) and support for employees. The company’s global vision and management of risks are the keys to the sustainability of insurance”, analyzes Liliane Spiridon, Director of Health & Benefits.
With a view to a (very) gradual exit from the health crisis, retirement and employee savings schemes have also undergone some changes. The pension reform has been put back on the table but with parametric rather than structural adjustments. The possibility of the end of special diets remains a project that could take place by 2022.
“This exceptional situation has led all players to rethink their relationships and methodologies. This in-depth transformation of the insurance market should continue in 2022. Thanks to the technical expertise of its teams, Gras Savoye Willis Towers Watson will continue to support and advise companies in setting up, adapting, and optimizing their risk management policy. The objective is simple although difficult to implement: to arbitrate the retention systems to be put in place, in line with the financial capacities and the prevention programs of our customers”, concludes Cyrille de Montgolfier, General Manager of Gras Savoye Willis. Towers Watson.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a global consulting, brokerage, and software solutions company that helps clients worldwide turn risk into an opportunity for growth. Willis Towers Watson has 45,000 employees in more than 140 countries and markets. We design and deliver solutions that manage risk, nurture talent, and maximize profit to protect and strengthen organizations and people. Our unique market vision allows us to identify the critical issues at the crossroads between skills, assets, and ideas: the formula that stimulates the company’s performance. Together, we unleash the potential.