Industry experts debate capacity in the high net worth (HNW) sector following the Covid-19 pandemic, Brexit and a slew of pricing regulation from the FCA

WE ASKED: How buoyant is capacity in the HNW market post-pandemic?

Katie Small, head of private clients, Miller

Katie Small_Miller

Katie Small

“There is a combination of pandemic-related trends and cyclical market forces currently at play.

”As people spend less time in their homes post-lockdowns, we’re seeing car theft rates increase after a relative lull in crime rates. Certain luxury car brands have been particularly targeted and many insurers are either restricting their coverage in these cases, or requiring upgraded security be put in place.

”There has also been the impact of the so-called ‘wall of money’, with money being redirected into home improvements, cars, possessions and garden renovations. The HNW market is well positioned and insurance is compulsory with most of these purchases.

“There are numerous new entrants in the market, which should bring greater capacity and give consumers more options. At Miller, we entered the market as a trusted partner, to provide clients with stability and security for the long term.

“Whilst in previous years we have seen rate increases on books as underwriters focused on correcting their position, we are not expecting to see these types of increases again.

”However, if HNW insurers do not cede to Flood Re, then they often cannot offer cover in areas with high flood risk or surface water - even those that are able to provide cover are being more selective.”

Mike Keating

Mike Keating

Mike Keating, chief executive, Managing General Agents’ Association

“HNW remains a challenging market. Rates continue to harden - over the last two years alone we’ve seen almost double-digit increases.

”Attritional loss ratios are under pressure from higher average claims costs. This is due to the increased frequency of escape of water claims, plus more severe weather events consuming large loss funds more quickly.

“Secondly, without the ability to travel throughout the Covid-19 pandemic, many HNW policyholders have invested in home improvements and renovations.

”With the trend for open-plan design showing no sign of abating, if escape of water does occur in these properties, the damage can be wide-reaching and expensive to restore.

”Lastly, we also saw a large number of people taking to separate buildings or garden offices during the pandemic - this has opened the door to more instances of cyber attacks.

“To remain profitable in this area, insurers demand consistent underwriting profits, transparency of data to drive more accurate and sustainable pricing, as well as a focused analysis of claims trends, all underpinned by an excellent claims service.

“MGAs that can fulfil all of these requirements for their capacity providers have had very few issues in maintaining their relationships. During the pandemic, managing agents proved valuable within the insurance ecosystem, quickly filling the customer service vacuum that many insurers were unable to address due to the sudden disruption.

“Despite it being an undeniably challenging area, the HNW market remains healthy and MGAs that can provide all of the required support can and will continue to successfully access and retain capacity arrangements.”

Geraint Jones, senior private clients executive, Broadway Insurance Brokers 

Geraint Jones_Broadway Insurance Brokers

Geraint Jones

”Although the pandemic has impacted insurance provision in some sectors, there is plenty of capacity in the high net worth market.

”Having said that, there are still challenges in relation to certain niche aspects, such as when it comes to dealing with the risks associated with young, high profile individuals. Insurers are very much alive to how someone’s status and lifestyle might present potential problems.

”We have also seen issues related to underinsurance become more of a consideration.

”Although most insurance companies have looked at increasing the index linking applied to building sums insured because of Covid-19, Brexit has resulted in a lack of raw materials and skilled labourers, so prices have gone up. It is certainly something which has become more acute in the last 12 months.

”No one knows whether the current supply chain issues will ease as the final lockdown restrictions are removed, so it remains a headache for the time being at least.”