Over the first half of 2011, the insurance market faced natural catastrophes, threats of political instability and legislative changes. This has led to the prospect of significant losses for insurers. As insurers look to recoup some of these liabilities through premium increases, clients face continued financial pressures in a time of ongoing economic uncertainty.

Whilst insurers are pushing for rate increases on almost all classes of business, excess capacity in the market is creating competition. This has enabled brokers to secure renewals as per the expiring premium, or even at a discount. At the same time, clients are looking to reduce their insurance premiums as part of their overall efforts to reduce costs. This is putting additional pressure on their brokers and the wider market.

Nevertheless, the market has imposed rate increases in some lines of business, such as motor, along with a tightening of terms and conditions. This trend will likely continue over the next six months, although premium reductions may still be achievable for well managed risks with a good loss history.

Topical Risk Issues

Political Instability and Insurance Coverage
Political instability, highlighted by recent events in the Middle East and Africa, poses challenges from a property, terrorism and political violence insurance perspective. In particular, concerning the manner in which these coverages interact.

At times of instability, many policies covering different aspects of property and different perils may be affected. This includes policies that are part of local/fronting, master property programmes, and any political violence, political risk and/or terrorism programmes. It is not always apparent how such policies will respond.

For insurance, events that are generally described as "terrorism" may actually be considered "war", "civil war," or another political violence peril. Political violence insurance should be considered by companies with exposures in high risk countries.

Cyber risks
Recent multimillion-dollar privacy cases have highlighted cyber risks as a growing issue for firms. Large losses in sectors such as retail, credit card processing and financial institutions have caused insurers to review rates and terms. However, the cyber liability insurance market is competitive and has ample capacity.

Supply chain
Companies' supply chains face constant challenges, as exemplified by last year's volcanic eruptions in Iceland and by the Japanese earthquake of 11 March and its ongoing impact on several major industry sectors. With supply chains lengthening, firms need to ensure they have comprehensive contingency plans in order to protect revenue and market share.

Name (required)

Email (required)

Website

Enter the code shown above:

Notify me of followup comments via e-mail