Etienne ChampionChief Underwriting Officer APAC & Europe at AXA XL
November 4, 2021
For more than 18 months, the world has been grappling with the effects of the COVID-19 pandemic and the changes brought to all aspects of business and life. As well as the immense human tragedy and devastating societal impact, the pandemic brought with it new risk challenges as companies pivoted their business models, dealt with supply-chain issues and sought to manage colleague health and wellbeing.
Against that backdrop, the insurance market too has been undergoing a period of change. After more than 12 years of soft market conditions, a series of large losses across the industry had resulted in rate increases for many lines of business, even before the pandemic struck. As we head towards this year’s renewal season, we can expect a continued tightening of terms and conditions for many business lines.
Recent disasters such as the German floods this summer, Hurricane Ida last month, and wildfires in Europe, the United States and China, have served to exacerbate the capacity constraints that were already being seen. Insurance capacity for most property and casualty lines continues to be strictly controlled and the hardening trend observed in the reinsurance market is also having an effect on primary layers.
Our European risk manager clients will be well aware that coverage in many areas of their property, casualty and international financial lines will likely be subject to continued rate increases at the 2021/22 renewal. Good communication between risk manager, broker and insurer will be a key factor in ensuring that clients are able to secure the insurance capacity they require. We remain focused on our clients and brokers and open to discussions about their risks and the solutions needed to manage and transfer them.
As renewals discussions take shape, it’s not all doom and gloom for buyers of insurance. One very noticeable trend is that there is a tangible reward for good risk management when full, transparent risk information is provided by clients.
Many of our clients have demonstrated a great deal of sophistication in their risk management toolkit. For those with captives, these have been used to manage risks, to retain a portion of those risks and to use the insurance and reinsurance markets to transfer higher layers.
Many clients have been retaining layers of risk that they hadn’t, until now, put into their captive, such as cyber, for example. This not only demonstrates to underwriters that risk managers have “skin in the game” when it comes to managing those risks in a robust way, it also typically serves to improve the quality of risk information garnered by the client and communicated to us.
When buyers are able to demonstrate sophisticated risk management and transparent risk information this is typically rewarded in the terms and conditions and capacity that insurers will deploy.
pIt might appear that insurers are asking for increasing levels of information, or new information, from clients and brokers for certain coverages, such as cyber. This is a necessity as technologies and risk evolve and in tandem insurers need to understand the prevention measures in place. This is not a new concept and with good tripartite communication between risk manager, broker and insurer, the right coverage and structure can be secured.
Just as the insurance market goes through cycles, the world of risk management is constantly changing too. In recent years, the issue of climate change has risen up the agenda for corporates and individuals the world over. This is not just a challenge for governments, it is a challenge for us all.
Climate change and the risks it poses – both short and longer term – cannot be ignored. And it has become clear that climate change will have huge ramifications for the ways risks are presented and transferred.
Addressing the climate challenge has been at the heart of how AXA Group operates and will increasingly be a major factor in how we allocate our capacity going forward. When clients are able to demonstrate sound Environmental, Societal and Governance (ESG) practices this is a differentiating factor and translates positively into our risk assessment.
In recent months we have been increasingly seeing clients including ESG information in their risk presentations. This is a very welcomed trend. When ESG is truly embedded in a company’s operations there is, we believe, a strong correlation to their loss ratio.
As we all look towards the fabled ‘new normal’, insurers remain ready to work with their clients to manage and transfer their evolving risks.
We are seeing encouraging signs from our Political Risk, Credit & Bond clients of an uptick in economic activity and investment in construction projects. Our aerospace clients too have begun to report an increase in activity.
The pandemic has underlined the importance of being prepared for major risks and being adaptable. The role of insurance as a provider of greater certainty in uncertain times has perhaps never been so relevant.
And just as we are requiring buyers to provide ever more granular and detailed risk information, we recognise that the insurance market must work to provide greater clarity to its clients around wordings and what is covered under the policies we underwrite.
It all goes back to communication. As we head towards this round of renewals, we look forward to the discussions to come. Let’s keep talking.
Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. AXA XL Risk. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any publication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with this publication, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.
US- and Canada-Issued Insurance Policies
In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.