The impact of the “Black Swan” event of 2020, being Covid-19 accelerated the Property market from a “firming” market to a “hard” market with rate increases being witnessed across the board of approximately 12.5% to 20% on clean business in London, much less so in Latin America and MENA along with some tightening of terms and conditions. Apart from the impact Covid-19 had on pricing and deductibles levels, it is also had an impact on the way renewals and new business were being written with specific exclusions for communicable disease a market requirement on most Property accounts.
The UK Prudential Regulatory Authority’s (PRA) ongoing requirement for London based underwriters, especially those operating as Lloyd’s syndicates, to address poor performing classes with a clear plan for a return to profitability was a key moment, not just for 2020 but for the market’s long-term future. Property was one such class of business which, as we at Barents Re had argued for some time, needed greater underwriting discipline in certain sections of the market. The theme across the Property market appeared to be profitability over new business growth, as the expensive capacity of yester-year became the new norm and thus further driving premium levels upwards.
Price increases, reduced lines sizes, increased minimum premiums, increased deductibles and the exiting of certain underperforming occupancies and trades became the mantra for many carriers and Lloyd’s syndicates. Policy terms and conditions were tightened, and more emphasis put on those extensions which may have been providing unintended cover, such as cyber related losses.
The resultant effect was the partial or complete withdrawal by several carriers and Lloyd’s syndicates in many classes of business, notably in international Property. However, throughout 2020, several new carriers, outside of Lloyd’s, brought capacity back into the London market, taking full advantage of the ‘hard’ market conditions, whilst inadvertently diluting them somewhat. Whilst Property capacity in the London market shrank overall, capacity from overseas markets remained plentiful, meaning the effect of the PRA’s mandate while positive, was not as extreme as some had first thought, due to the persistent oversupply of international capacity.
In terms of the Property market outlook for 2021, trading conditions are expected to remain positive, as plentiful re/insurance capacity is available. We will look to grow in territories and occupancies where there is the opportunity to do so.
At Barents Re, we will continue to enhance our book of business by maintaining focus on our core underwriting principles to develop a solid portfolio focused on high quality risk protection, favorable loss records and a diverse spread of risk.