Survey results demonstrate a particular interest in sustainable energy risks in the London market

The London market has “buoyant” growth ambitions for 2022, with insurers noting they have a positive appetite for sustainable energy, cyber, cargo and stock risks, according to new research by international broker Howden, published today (8 March 2022).

The broker’s annual London market survey, which polled 38 c-suite leaders working at London market insurers, aims to gauge underwriting appetite by line of business.

Speaking on the research findings, Howden executive director Paul Cumberland noted that “growth ambitions are buoyant across the market with very few contractions or withdrawals and most insurers looking to at least track rate or, preferably, grow beyond”.

All lines of business within the survey returned positive appetite scores from insurers for the coming year, with sustainable energy, cyber, cargo and stock throughput receiving the highest scores.

Cyber, climate, catastrophe

While cyber received the second highest appetite score from insurers, Howden clarified that this line of business was experiencing a “curbed appetite”.

This was demonstrated by cyber receiving one of the lowest scores from insurers in terms of appetite for new business, measured via the delta between planned gross written premium (GWP) growth and insurer anticipated rate change per product line for 2022.

Howden’s report explained that while cyber was expected to see the largest rate increase this year, compared to other business lines explored in the survey, this “may be offset by other challenges, as demonstrated by a display of insurers’ limited appetite for new business, exceeding that attributable to rate on renewals.

“However, there are carriers that enjoy a market share and have greater experience of the class that are looking to increase their cyber books significantly, by both rate and exposure.”

Markel’s divisional managing director of cyber, Scott Bailey, added: “Price elasticity in insurance has been an open debate for some time.

“We’re starting to see that pinch point exceeded with clients now turning away from risk transfer more than ever before, or at least choosing to have more skin in the game to manage the premium increases as best they can.”

Howden’s market report added that, due to “above average catastrophe losses in 2021” and “increasing uncertainty driven by climate change”, the majority of the survey’s respondents were pursuing a strategy of “reducing the degree and proportion of catastrophe exposure in their overall portfolio”.

Emerging markets

The appetite for sustainable energy lines, however, topped both the sum appetite score and appetite for new business in 2022 categories, according to Howden.

The broker explained that increased insurer appetite for this class of business was “disproportionate to the anticipated rate change for 2022” due to factors such as “sustainability’s prominence in commercial agendas”.

Sustainable energy is a “class of business at the start of its evolution”, the research noted.

Peter Fitzsimmons, head of onshore renewable energy at Axis, explained: “While London’s appetite is growing to accommodate this demand, it appears to be proceeding with caution.

“The opportunity is perhaps being seen more as growth potential rather than strategic realignment, as this new capacity is hesitant to lead or to participate on some of the standalone renewable energy placements.”

Cumberland explained that lines with growth targets significantly higher than insurers’ estimated rate increases means that significant amounts of new business would have to be written by insurers with strong growth ambitions.

He continued: “The question then becomes one of flow of business into the London market – will this be sufficient to satisfy the demands of the suppliers and keep rate movement positive?”