Official: We are entering a "HARFT" market!

No, this is not a typo! We are entering a ‘Harft’ market, a market that is neither soft, nor hard, sometimes a bit of both, sometimes more hard than soft, or vice versa!

There is no doubt that we have entered into a period where the energy market is more challenging, more difficult to read, where the fundamentals still point to a soft environment, but where the reality of the marketplace is more complex.

Conflict ing signs abound:

A few underwriters are planning to reduce capacity for 2012, some have already done so in 2011 for liability.

• Some carriers are looking to expand and some new dedicated capacity is being created.
• The referral process for many carriers has become more cumbersome over the last few months, signalling more control and management oversight on underwriting decisions.
• Natural catastrophe capacity is becoming much tighter and more expensive.
• There is no sign of an overall significant shift in the capacity available for 2012 and there seems to be a consensus that capacity will continue to be plentiful next year.

These conflicting signs are described in the individual sectors review contained in this market monitor, except in the US liability section where we are clearly witnessing a marked change in the market for excess capacity.

Those who study insurance history may view this shift in the energy liability marketplace as a replay of 1985 where the liability crisis in the US lead to an overall hard market. For the moment, we will stick to our description of the energy market as being ‘Harft’.

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