A large number of companies have already had to contend with a tough market and rising premiums in industrial property insurance in recent years. However, the current renewal phase is taking on a special dynamic which will present all parties with challenges in the final weeks of the year, with COVID-19 a major factor – and not just because the financial impact of the pandemic is uncertain. It cannot be ruled out that the shortage of capacities at the end of the year will cause problems for certain customers.
Insurers are still focussed on improving profitability. Their restructuring behaviour and, in particular, the wide range of claims makes it difficult for many customers to decide whether they should renew their policies or not. Nevertheless, companies should not delay the conclusion of policies any longer. For the later in the year policies are renewed, the higher the probability that companies will have to face further premium increases.
Owing to a higher number of underwriting bans, lower shareholdings, the merger of insurers and a much stricter focus on risk quality and exposure to natural hazards, national capacities are becoming scarcer. Although, in many cases, sufficient supply of coverage is often still available for small and medium-sized companies, their type of operation and risk quality could prove problematic when it comes to the renewal of their property insurance policies. The willingness to accept deductibles and provide for loss prevention as well as risk quality are, in many cases, key if problems concerning the renewal of policies are to be successfully addressed.
Premium increases and reduced capacities are not the only hurdles in the current renewal phase. Exclusions of data/cyber risks and infectious diseases – occurring as a direct consequence of the COVID-19 pandemic – are further complicating current negotiations.
Their results are very different. Against the backdrop of the COVID-19 pandemic, a small number of insurers see a need to exclude infectious diseases from cover. For the German insurance market, it is still unusual for policy renewals to be inextricably linked to the exclusion of data/cyber risks. This leads to material restrictions in insurance cover, as the respective policy clauses only provide for the partial re-inclusion of some specific risks.