December 2023 Marketplace Insights

Bucking the Trend

There’s an old saying that you don’t know if there will be a recession until you’re in one. For now, all the markers are there – inflation, interest rate hikes, record-high bankruptcies, labour tightening, class-action suits, hampered supply chains, and global conflict. Despite this, the insurance industry, with some exceptions, remains relatively stable across personal and commercial lines.

Underwriters are seeing strong results in the first six months of 2023. Mirroring the rest of the market, commercial writers
benefited from a dramatic turnaround in investment results. The outcome is a 71% jump in net income over the previous year and top line growth of 9.3%.

It could be a lag effect, but even the near 20% year-overyear bankruptcies in Canada in June and a hike in SPAC filings in the US haven’t dampened the appetite and aggressive competition for underwriters in the directors and officers (D&O) liability space. D&O is expected to see a continued softening for both primary and excess liability.

For commercial general liability, we’re seeing ample room for brokers to put together policies that benefit both insurers and the  insured. Contractors in the commercial construction industry are a preferred class, with abundant capacity, room to move and favourable terms as clients come up for renewal. Some of the savings may be hampered by a 100% increase in material, input and labour costs, and uncertainty about the inflationary environment, leading contractors to put the brakes on some projects.

Certain classes of business are still hard to place. High-risk subcontractors such as roofers, HVAC and plumbers, and wood frame project cover continue to be subject to scrutiny and notas-favourable terms by insurers. In agriculture, underwriting requirements for fire protection haven’t caught up to a new size of business in rural Canada. We’re now dealing with increasingly sophisticated conglomerate food growing, processing, and manufacturing, and shipping operations replace the smaller operations of the past. Many of these companies are finding innovative ways to respond with more agility to manage everchanging supply route options. But brokers need to do better to analyze and communicate the opportunity for insurers in the new risk environment.

Rampant auto theft, a return to pre-COVID driving patterns, and government action in the provincially mandated auto sector may hinder appetite in some parts of the country. At the same time, more stringent regulations regarding property in flood and wildfire zones may see two classes of home insurance in future. For the moment, however, there is appetite among existing insurers, as well as continued new entrants in many markets, which is amping up competition and keeping prices relatively stable. At the same time, insurers continue to experience profitability. Whether this is a lag effect or optimism remains to be seen. What we are seeing is the expectation from insurers for due diligence, with ample opportunities for best-inclass clients to work with broker expertise and find the right mix of risk control and insurance.

Download the full article for insights into industry trends in the construction, commercial property, liability,  D&O, cyber, personal and travel spaces. | December 2023 Marketplace Insights: Bucking the Trend

If you have questions specific to your business, or would like additional information, please reach out to your Iridium Risk Services Advisor.