With the dizzying shift in the market it's difficult to keep track of what risks to take on and what to withdraw from. Insurance Times' Amanda Swinburn summarises the markets of rapid change
The insurance market has always been subject to bull and bear cycles, but the events of 11 September, coupled with three years of poor results have taken their toll on a market that already was erring on the side of caution.
With limited capacity available, insurers are becoming increasingly choosy about the sectors they are in.
Numis analyst Nicholas Johnson said: "There are several areas that are looking unattractive to the insurance market at the moment, including medical malpractice, workers' compensation, professional indemnity and non-standard motor.
"Many insurers are looking to get into markets that have seen rates soar, such as reinsurance, commercial property and war risks."
HSBC analyst David Hudson said, while personal lines had been loss-making for the past few years, the outlook for the general insurance market as a whole is now looking rosier.
"The good thing now in the UK is that we don't seem to have excess supply. We are now having the healthiest recovery phase there has been for years," he said.
Areas that insurers are avoiding at present are classes where there may be third-party bodily injury claims, such as employers' liability and commercial motor. This is because the cost of damages tends to rise much faster than premium rates.
Hudson also predicts that rates for homeowners insurance will rise again, because burglaries and fraudulent claims tend to rise during a recession.
High net worth
CGNU, Groupama, Legal & General and Zurich recently announced plans to muscle in on this sector. A significant gap was left in the market when Cox decided to pull out and Independent collapsed.
Direct Line has bought the Italian direct motor division of Royal & SunAlliance for £12m cash.
The company also has a presence in Spain and Japan and plans to tap into the German market in the next few months.
The insurance industry is growing by 6.8% per year in Ireland, as companies flood into the country to take advantage of low corporate tax rates.
The events of 11 September have led to soaring reinsurance rates, and there have been several new entrants into the market, particularly in Bermuda. Goshawk Re has popped up on the island and ex-Markel executive Nigel Roger is tipped to be heading up another new entrant.
Another lucrative market, which has been subject to double (and triple)-figure price hikes since 11 September. However, Hiscox has stopped writing out of commercial property.
Credit hire and credit repair
In December GE Capital subsidiary Accident Assistance became the latest credit hire insurer to announce plans to exit the market. The company blamed its decision on recent court rulings that led to a cut in rates.
There are few players left in the market after CNA's departure in 2001.
Restaurant and takeaway
US insurer CNA announced plans last month to retreat from the restaurant and takeaway market as part of a strategic review. The insurer refused to explain its decision and gave brokers just two weeks to find a new insurer.
Reinsurers threatened at a recent meeting with the ABI to withdraw terrorism cover at the next renewal. Everyone from travel to aviation insurers are refusing to include acts of terrorism in their policies.
Claims have risen by up to 12% per year since 1996. The sector has been dogged by employers' liability claims, particularly from those exposed to asbestos in the workplace. Norwich Union has stopped writing stand-alone.
The London Market has seen many high-profile exits in the past year, including CGNU and AXA. Companies seem to be attracted by markets such as tax haven Bermuda.
The St Paul Companies has withdrawn from medical malpractice recently due to rocketing claims.
Still reeling from the loss of four planes on 11 September, plus plane crashes in Italy, the Black Sea and New Jersey since then, aviation insurers are now being faced with the possibility of a rash of claims for deep vein thrombosis (DVT).