The AMRAE (the French equivalent of the BELRIM) has recently published its study on the trends of the P&C market. Here is a summary of the global trends and observations for the P&C LOBs in Europe.
Towards a “hard market”
The European insurance market is getting harsher. Indeed, with low interest rates, the financial incomes of the insurers are shrinking, and they must restore a technical balance. However, “the combined ratios are more than 95% for most of insurers and reinsurers” notes Léopold Larios de Piña, project coordinator of this study.
In this context, insurers must yield more profitability from the P&C lines. It translates to higher premiums (except for liability lines), more severe contract renewals and a bigger attention to the underwritten risks, with a more rigorous selection of those risks. As a consequence, the role of risk managers and underwriters is becoming even more important and critical.
Out of this report, we chose 3 lines of products that are at a turning point:
These last years have been important for the construction insurance markets: big claims due to natural catastrophes, bankruptcies, lawsuits… Given the history, insurers are more cautious when underwriting long term risks such as IDI. Thus, the risk Association notes that the trend is towards an increase of premiums, a decrease of coverages and a more refined selection of their clients.
The evolution of the motor, and more specifically cars, is constantly discussed: electric, connected, autonomous, or even Hyperloop… Even though these innovations are supposed to make us safer, the number of “serious” claims has increased. This increase is partly due to new driving behavior, such as the use of smartphone while driving, or new types of mobility occupying the streets (hoverboards, electric scooters…). While in France a raise from 10 to 15% is expected for the motor premiums, in Belgium, tariffs are stagnating.
From an actuarial point of view, the technological progresses should first impact claims and then pricing, with a more dynamic and segmented approach.
Finally, the Risk Association is betting on the emergence of a “digital or cyber’ liability aspects in these types of products due to the apparition of the risk of data loss or theft that could happen during data transfers between connected cars, navigation systems, insurance companies’ devices, highway surveillance system and smartphones.
As we mentioned last month, cyber risks are still relatively new and unknown to (re)insurers. However, the market for this line of products is steadily growing. Claims allow to discover more about this risk with each file. (Re)insurers that decided to sell these products are still learning and currently developing their knowledge and skills in this area.
In its report, the AMRAE stresses the importance of “putting oneself in a position of continuous learning”. Moreover, the discovery and innovation of this type of new products is a real team effort “which must bring together all the sufficient resources to allow a real transfer of risk”. In this context, it is crucial to mobilize talents who will be able to model the risks properly and in the most accurate way possible, such as actuaries and risk managers. This point remains critical for players underwriting this type of Cyber risks in order to properly test the insurer’s financial soundness and ensure its ability to compensate for the loss and damages.
- (FR) AMRAE, “Etat du marché IARD 2019”
- (FR) Assuralia, “Principaux résultats de l’assurance belge en 2018”
- (NL) Assuralia, “Kerncijfers en voornaamste resultaten van de Belgische verzekeringsmarkt in 2018”
Picture : unsplash.com