All this is set to happen in 2022
All this is set to happen in 2022
The industrial property insurance market in Germany is not only experiencing a tougher market cycle, but is also undergoing sustained transformation. Indications of how the industrial property insurance market looks set to develop in 2022 can be found in key figures published by the GDV (the German Insurance Association). Thanks to a more normal burden from major losses and the flash flooding caused by the low-pressure weather system known as "Bernd", last year's loss expenses led to a combined ratio of 177 percent*, the highest value the insurance market has seen this century. Insurers will, therefore, be sticking to their measures to improve profitability.
This will be reflected in particular in strict risk selection, stringent quality standards for fire protection and in the targeted allocation of capacity, including for limits on natural hazards. The main areas of focus will continue to be issues such as ESG, retroactive coverage and the impact of climate change on natural hazards. The rate of price increases will nevertheless slow, as insurers increasingly concentrate on securing their portfolios once more, after three years of restructuring. Nevertheless, the premiums demanded by insurers will continue to cover a broad range. This may be advantageous for customers, at least in highly competitive operations.
Two years of sometimes massive premium increases accompanied by capacity cuts are behind us. There are now a number of slightly hopeful signs that the D&O market is set to stabilise. The reasons for this are that new players have entered the market, offering their own insurance capacities and thereby stimulating competition. The reinsurance market is in fine fettle. In addition, major insurers are again opening up a little more, on the lookout for new business. However, not all companies are likely to benefit from these positive signals in equal measure. The main market-related reasons are the still low insurance sums compared with those granted during the soft market phase prior to 2019, the highly varied assessments of companies by D&O providers and the many pending lawsuits, especially in the US. Overall, companies have it within their own grasp to increase the opportunity to obtain adequate insurance cover. It is, therefore, essential for companies to remain in close contact with their consultants and together to define a forward-looking strategic policy-renewal plan. Likewise, it is important to prepare risk data in close consultation, to create a basis of trust with risk carriers and to keep an eye on options for traditonal D&O insurance cover.
The liability market will see continuing fluctuation in 2022. Exposed risks will still be affected by premium increases, reduced capacities and adjusted retentions/deductibles. Although insurers' earnings positions are likely to have improved as a result of higher premiums and adjusted deductibles in 2021, the question of whether (and to what extent) this will trigger premium increases will depend primarily on two factors: has the insurer in question already reached its target, and have the measures improved its own result? In the case of exposed risks and industries in particular, insurers will be closely examining risks and premiums. These insurers are likely to conduct negotiations on deductibles/retentions and coverage restrictions with even greater diligence in 2022.
Marine Cargo Insurance
The marine cargo insurance market is in flux, changing much more quickly than it did a few years ago. Marine cargo insurers had to deal with a wide range of issues last year, ranging from the grounding of the freighter "Ever Given" in the Suez Canal to the looming threat of cyber attacks and pandemic-induced losses, as well as negative claims history.
This year, providers will once again be dealing with risks on a highly individual basis. As a result, major variations in premiums and differences in the scope of coverage of different policies are to be expected. Efforts to counter this may also be observed in individual cases, especially in the case of multi-year policies that are about to expire; the same also applies to policies that fall below certain minimum requirements.
In most lines, there are no indications of general price increases for the portfolio as a whole. The insurance capacities provided continue to be sufficient. It is only for more complex risks, such as gas turbines, boilers, steam turbines, offshore, undersea cables or project risks with high maximum loss potentials where insurers are now tending to offer somewhat lower underwriting shares. A number of providers are also trying to increase prices and/or restrict the scope of cover. In the case of coal-fired power plants, the underwriting behaviour of insurers is also very heavily influenced by environmental responsibilities associated with ESG (Environment, Social, Governance) goals and therefore remains rather unclear.
* GDV, projections based on 4th quarter