Richard Webb, director at Manchester Underwriting Management, explains why he thinks a soft market would be ‘catastrophic’ amid claims inflation, global wars and UK leadership changes
There is a French saying: “Plus ça change, plus c’est la même chose”. This means the more things change, the more they stay the same.
Right now, the state of the world seems to be up in the air. The UK is getting a new prime minister, the war in Ukraine continues, Taiwan is a worry, inflation is rising, the impact of Brexit is still working its way through and there is talk that a recession is coming.
All this change is throwing everything up in the air - but, if history has taught us anything, it is that these events happen and we all move on.
The insurance market hardened in 2018 after the longest soft market on record. Earlier this year, the market conditions steadied, but now there is the impact of the events listed above.
Claims inflation is also causing concern for reinsurers and insurers. The rating increases achieved over the last few years have brought rates back to realistic levels, but now there is the impact of inflation. This is a worry in all lines of business, but particularly in longer tail lines.
Manchester Underwriting Management specialises in casualty and professional indemnity insurance.
To head back into a soft market would not work for any of us. I can already hear the counterargument that as underwriters, of course we would believe this, however it cannot be denied that there needs to be enough premium to cover the cost of claims.
Over the last few years, rates have come back to a level where (re)insurers are starting to see their books perform as they should. Brokers have seen their levels of commission allow them to trade on service - not just on price.
However, we now have inflation moving the pricing bar up. Adding market softening would be catastrophic.
So, why say everything is changing but not changing? We’ve been here before. Prime minsters change, economies slide, inflation comes and goes and, sadly, even wars aren’t new. We have the novel concept of Brexit and the potential escalation of the Ukrainian conflict.
Did the insurance industry successfully manage these types of events previously? And will it continue to handle these events when they are occurring thick and fast? We’ll see.
But the last thing any of us - customers, brokers or insurers - need is a softening market too. It would be chaos.