Corporate risk insurance Market Report - 2020 Renewals - Siaci Saint Honoré
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SIACI SAINT HONORE
is a leading European independent provider of
brokerage and consulting services specializing
in property & casualty and life & health
insurance and the provision of corporate
SIACI SAINT HONORE, partner of culture,
services with strong market positions in supports the reconstruction of Notre Dame cathedral.
Europe and around the world.
Corporate risk insurance
Market Report
2020 Renewals
CULTURE OF CONTENTS
E XCELLENCE
2019 5. FOREWORD
THE CULTIVATION 6. INNOVATING FOR OUR CLIENTS
OF EXCELLENCE SIACI SAINT HONORE 8. PROPERTY & CASUALTY
is an European leader
IS ABOVE ALL A STATE in risk management
12. REINSURANCE ALTERNATIVE TRANSFER
OF MIND consulting and insurance 14. THIRD PARTY & ENVIRONMENTAL LIABILITY
brokerage with strong
international growth across 16. CONSTRUCTION
all of its markets.
20. MOTOR FLEETS
With entrepreneurial
shareholders, and 22. FINANCIAL RISKS
shareholding management
26. MARINE & CARGO
and employees, the Group’s
independence and the 30. POLITICAL RISKS
development of its culture
of excellence are 34. CREDIT - SURETY
guaranteed. 36. AVIATION
38. CINEMA-AUDIOVISUAL & PERFORMING ARTS-CANCELLATION
40. SPORT & GLOBAL EVENTS
42. SIACI GLOBAL PARTNERS
44. GLOBAL OVERVIEW OF THE INSURANCE MARKET
46. PARTNER OF CULTURE
47. AN INDEPENDENT EUROPEAN LEADER
48. 2018 KEY FIGURES
49. INTERNATIONAL
FOREWORD
Hervé Houdard
Vice Chairman of the Executive Board
Managing Director
The worsening financial results reported by players in the direct insurance market are
leading to a hardening of coverage and pricing conditions while, in comparison, the
reinsurance market remains stable and very steady, as was confirmed at the Rendez-
Vous de Monte Carlo conference in September 2019.
In this strained economic climate for all players in the corporate risk market, the
teams at SIACI SAINT HONORE have made every effort, based on their day-to-day
dealings with their clients and insurers and reinsurers in France and around the world,
to provide an accurate forecast of renewal conditions.
We hope you find it useful.
«
With its values of independence, expertise, innovation and availability rooted
in its corporate culture, SIACI SAINT HONORE anticipates changing trends
in markets and risks to find solutions which guarantee the security and
development of its clients.
The cultivation of excellence is above all a state of mind.
SIACI SAINT HONORE 2020 MARKET REPORT 5
INNOVATING FOR OUR CLIENTS
“ In this market context, SIACI SAINT HONORE provides sustainable,
”
innovative solutions in the ongoing pursuit of its clients’ interests.
Against this backdrop, SIACI SAINT HONORE continues to seek innovative solutions
Mylène Poisson-Lebel supported by clear, proactive communication.
Director of Markets and Placement Our added value is based on our ability to put forward innovative angles and alternative
Corporate Risk and Insurance arrangements in the ongoing pursuit of our clients’ interests and establish sustainable
partnerships between our clients and their insurers.
Nevertheless, it remains important to monitor future economic trends:
In 2019, the players in the insurance market had to adjust their results, resulting in
Will we see Brexit in 2020 or the renewal of the transition period? What impact will
Foreword increased vigilance on high-risk business and/or specific activities leading to delayed
that have on our business lines?
renewal conditions which varied from one insurer to another and even within the
same insurance company (terminations, decreased capacity and pricing increases). What will be the effect of the presidential elections in the United States and certain
Lines of Expertise regions of Africa?
Looking ahead to 2020, we can see that the insurance market is more reactive while
the trend in the reinsurance market remains more nuanced and positive. How will European countries be impacted by the growing litigation culture in the
Global Overview United States and the reverberations from the US insurance market with its losses
We are not seeing a generalized, dogmatic inversion of the cycle; there can be no in Third-Party Liability?
windfall effect for insurers, but alternative, pragmatic and constructive discussions
Our Group thanks to SIACI SAINT HONORE’s skills in forward planning, negotiation and Will we be victims of a major cyber-attack requiring countries to establish rules to
innovation, skills which are increasingly in demand, tried and tested. provide coverage over and above a certain amount as was the case after 9/11?
Even if we are no longer seeing a downward trend, the upward swing in the direct Our analysis, our projects and our negotiating strengths, together with our influential
insurance market remains focused on the insurance branches identified in 2019 role within the insurance and reinsurance market, are at the heart of our approach and
and on activities which have incurred losses and/or where there is a high level of constitute a shared and integral driver of our placement strategy policy in this context.
exposure (manufacturing processes, product recall, geographical areas, and US
exposure).
This upward swing, triggered by a worsening loss experience, has led to a reduction
in capacity, admittedly theoretical in absolute terms but nevertheless real, through the
closure of underwriting desks at international insurers and even at Lloyd’s syndicates,
as well as the issue of the insurability of certain risks and certain industrial activities.
6 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 7
General trend Market capacity
We saw a significant strengthening of the With combined capacity of more than
market at the end of 2018, particularly €6 billion, unchanged from 2018, the
for business with high-level fire risks, Property and Casualty insurance market
machinery breakdown, critical natural continues to have excess capacity.
events, supplier failures and/or files where
claims had been made. The AXA CS & XL CATLIN merger (AXA
XL) represents a potential reduction of
This trend became more marked in 5%, which will not be significant in terms Frédéric Durot
the second quarter of 2019 with the of capacity supply and will be offset by
Director
negotiation of the 2019 renewals in July organic growth.
Property & Casualty
and preparations for the 2020 renewals.
Two players are currently moving into
In addition to double-digit pricing Property and Casualty insurance,
increases, there was a reduction in the PACIFICA in the SME/SMI market who
market share of the lead insurers in will not be dealing with brokers, and
volatile business lines due to their claims BERKSHIRE HATHAWAY (BHSI) on
experience and/or their exposure, with the major accounts market.
01
increased demand for prevention and
retentions.
Property & Casualty By the end of the Rendez-Vous de Monte
Carlo conference in September 2019, it
could be seen that this remedial measures
Pricing
were being driven more by the direct Other than in exceptional cases such as
insurance market than the reinsurance business where risks are deemed to be
market whose positions are more stable. lower (real estate, airports, metalwork,
well-insured non-cellular plastics, etc.) the
This is illustrated by worsening results pricing increases applied are in double-
from the major property and casualty digits.
insurers following 2017 which was marked
Foreword by the natural events Harvey, Irma and Accounts where claims have been made
Maria (H.I.M.) and an increase in the and/or where risks are volatile are seeing
number of fire losses. increases of 25% or more.
Lines of Expertise
Moreover, some insurers receive Insurers, and in particular the large lead
instructions from their branches based insurers, have a policy of reducing their
Global Overview in the US, the UK or Germany, markets market shares, which puts pressure on
where there have been large pricing placements. This serves to accentuate
increases since 2018. the rising pricing trend.
Our Group
Long-term agreements, and/or extensions Additional retention (captives) is a tool
to them, are more difficult to obtain that helps mitigate increases or even
and are no longer rewarded by pricing preserve the insurability of the most
reductions. significant risks.
SIACI SAINT HONORE 2020 MARKET REPORT 9
Coverage improvement
Regulation First Party Silent Cyber
Long-term agreements and/or extensions
to them are more difficult to obtain in spite The subject of the BEAT tax in the
of pricing increases. US, where the market had struggled
to position itself in 2018, has now
We are not seeing guaranteed reductions been addressed by all major lead Among the symptoms of a hard Property & Casualty market is adversity to risks deemed to add volatility
other than in Supplier Failure at tier 2 insurers. to an already suffering Property & Casualty branch.
or higher which is subject to restrictions
and the special case of FM Global who In practice, the reinsurance of Exposure to critical Natural events, CBI (supplier failure), and NDBI (non-damage business interruption)
are reviewing some of the extensions local policies in the US is treated is affected and Cyber even more so, especially as the insurance of cyber risks is a branch which is now
which make their riders so generous (in in such a way (direct reinsurance structured in terms of underwriting, brokerage and the insurance and reinsurance markets.
particular in Cyber). by co-reinsurers) that the tax (5%
in 2018, 10% in 2019 and 12.5% in Cyber extensions for both direct Damage (data recovery) and Consequential business interruption
The phenomenon of the Yellow vests 2020) does not apply. losses are now either refused by the Property and Casualty insurers, or maintained at very low levels,
has led some insurers to raise the issue
a maximum of €1 million, and are subject to complex questionnaires which seem somewhat irrelevant
of the duration of an event, whether
to the insureds’ IT departments.
in relation to Political violence or, by
analogy, Natural events.
In a hard market, some insurers and reinsurers want to challenge the coverage of material damage
caused by Cyber-related factors. This challenge ranges from a strict exclusion to the exclusion of damage
other than fire or explosion or, more moderately, a sub-limit.
Claims We believe it is not necessarily appropriate to cover Cyber risks within a Property & Casualty program,
whether it be loss of data, service failures or business interruption due to a simple loss of data.
There were several fire losses of more
than €20 million in 2019, particularly in The wording of Property & Casualty policies is not designed to cover slow-developing Cyber phenomena
the waste sector but also in agrifood and in space and time. As a result, Cyber coverage within a Property & Casualty policy may not provide the
logistics. This type of claim is on the rise correct response. Our philosophy is that Cyber must be covered by policy wordings which have been
and impacts on the results and the attitude adapted, constructed and negotiated by expert brokers and specialized insurers.
of insurers. More than ever, prevention is
the key to negotiating successful terms On the other hand, we are always against material consequences and the resultant Business interruption
and conditions. losses being excluded or restricted, what is known as Silent Cyber.
Yellow vests: the impact of this A fire in a transformer, an explosion in a chemical reactor, machinery breakdown in a turbine, caking in a
phenomenon in 2018/2019 has been glass or metal-melting furnace, or a batch of wafers ruined during the etching process in a semiconductor
significant, generating more than €150 plant cannot be excluded or limited because they were caused by a Cyber-attack.
million in Property & Casualty and
Business Interruption claims, not including Likewise, the Cyber market does not have the capacity to cover the potential maximum level of claims
non-damage business interruption losses arising from scenarios such as this nor the expertise to assess this type of industrial risk.
which are seldom insured.
Some reinsurers want Property & Casualty policies to specify their position more clearly in terms of
Natural events: after 2017 and its critical Cyber and Silent Cyber. We agree it is preferable for policy wordings to be direct rather than implied.
natural events (total insured losses: $144
billion including Harvey, Irma & Maria at
$92 billion), global claims in 2018 were
significant at $80 million, the highest since
2012, excluding 2017.
There have been no major Natural event
losses in 2019 but the hurricane season
in the Caribbean and the Southeast of
the US (mid-August to late October) will
set the trend as it often does.
10 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 11
Variations in interest rates have had a After a record year in 2017 marked by
major impact on reinsurers’ results. In 2019, losses from natural disasters of €135 billion,
assets managed by the sector amount 2018 was also difficult for reinsurers (€76
to around USD 29,000 billion worldwide, billion). Damage due to natural disasters
including around EUR 7,800 billion in the in 2017 and 2018 combined amounted
euro zone (source: ECB). to €200 billion, the highest amount ever
recorded over a two-year period.
According to an impact study conducted in
2019, the 1% increase in returns on assets
managed by reinsurers is equivalent on
average to a 6.5% increase in premiums.
Alternative risk transfer
Etienne Charpentier
In early August 2019, the US central bank
- Captives Director
(the Federal Reserve or Fed) announced Alternative Solutions
a reduction in interest rates of around 0.25 The number of captives decreased and Transfers
percentage points taking them to below between 2014 and 2018 both globally and
2.25% for the first time in eleven years in Europe, in line with developments in the
and investors expect further reductions P & C markets.
in the coming quarters from all central Number of captives at 31/12
Reinsurance
banks. For P&C reinsurers, the effects of (excluding cells and compartments)
interest rate cuts should therefore lead to
7 000
the same upward pricing trend on portfolios
02
as for insurers, even if the structure of their
Alternative transfer
6 800
6 874
liabilities will allow them to spread these 6 778
increases over time. Even if reinsurance 6 600
6 700
should not be directly impacted, at the time
6 400
of writing uncertainty persists regarding 6 451
Doha Tabouri
6 337
Brexit and the long-term impacts on the 6 200
Reinsurance
reinsurance market.
6 000
Manager
On the French market, requests for 2014 2015 2016 2017 2018
Source : Business Insurance
the transfer of Facultative Reinsurance
Reinsurance Combined ratios of
the top 50 global reinsurers are increasing. The change in insurers’
Foreword underwriting policies due to worsening In Europe, the decrease is due mainly to
After two years, 2017 and 2018, which 120
89,7 90,4 95,2 110,1 102,3
8 results has resulted in additional internal the closure of captives which had been
referral requirements leading to decreases
Lines of Expertise were marked by a large number of Natural 100 33,6
set up in Guernsey since 2016.
Provision - Recovery rate (%)
34,0
event losses, the reinsurance market is 80
6
in their net retention. The most impacted
Combined ratios
33,5 34,2 34,7
going through a period of transition in an 60
activities are those with high volatility: Given the hardening of the terms being
4
Global Overview uncertain global economic environment. 40
agrifood, automotive, petrochemicals, offered and the pricing increases seen
in the P&C market, this trend has now
At a global level, the margins of major 56,2 56,2 60,6 76,5 68,2 2 waste, and metallurgy.
reinsurers are at historically low levels while 20
reversed with a wave of captives planned in
Moreover, the nature of requests for the
Our Group the reversal of provisions to improve the 0
2014 2015 2016 2017 2018
0
transfer of Facultative Reinsurance has
2019 for several French groups, particularly
loss ratio has been a frequent occurrence in Luxembourg and Malta.
Expense Ratio Global C/P Provision recovery rate
evolved: even if requests for de-risking
for some years now. Room for maneuver Source: AM Best data and research
remain at a high level, for example in The programs in question are tranches
is very limited in this field.
damage coverage for particular sites or of property & casualty and third-party
By way of reminder, the combined ratios Traditional capital available in the through the transfer of tranches of internal liability retention with these captives also
in the reinsurance market were greater reinsurance market has been stable deductibles, requests for the transfer of serving the purpose of directly accessing
than 100% in 2017 and 2018. since 2014 while the amount of alternative quota shares are increasingly significant the reinsurance market.
capital has doubled over the same period. thus pushing up transfer volumes.
At a global level there is still surplus In addition, the French authorities stated
However, the rapid growth in alternative
capacity in reinsurance, with traditional As far as pricing is concerned, in a general intention to attract captives is generating
capital anticipated by some observers
reinsurance accounting for approximately context of increased P&C premiums in the interest in France for the 2020/2021
following the accommodating monetary
80% of global capacity and the remaining direct market, reinsurers are tending to renewals, even though the regulatory
policies pursued by the central banks,
20% coming from. become competitive again. framework, which has introduced a more
including the ECB since 2012, has not
flexible provisioning regime, has not
come to pass. This trend should be
changed despite lobbying by industry
confirmed in 2019/2020.
associations.
12 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 13
Pricing Coverage improvement
The market continues on a downward trend Insurers are more cautious than before
mainly on medium-sized risks with little when it comes to coverage extensions and
exposure and no losses. exclusion waivers, especially on recently
written business.
On the other hand, business where there
have been losses or which have more They study them on a case-by-case
sophisticated coverage is being subjected basis subject to being provided with good
to remedial measures (pricing increases, quality technical information. Underwriting
increased retention using deductibles or the restrictions are tending towards greater Marion Ory
development of captive arrangements, or standardization rather than customization. Director
even reduced coverage…). It is important to Third-Party and
underline that certain business sectors due Environmental Liability
to their high exposure to the risk of product
withdrawals, recalls or contamination are
no longer benefiting from soft market
conditions.
Third Party & Claims
03 Environmental Liability The number of claims continues to rise due Regulated Professions
to an ever-increasing claims culture, the Capacity in Professional Third-Party Liability for Regulated Professions
development of even stricter regulations remains stable with high levels which vary depending on the business
and an ever-growing demand for coverage sector.
of environmental risks.
General trend The Legal and Accountancy sectors continue to see good loss ratios
which make it possible for insurers to maintain capacity. However, a
The loss ratios of third-party liability
insurers are worsening, requiring higher worsening of results can be seen on some symbolic key accounts.
At a time of rising claims and concentration Awareness of environmental risks on the
of players, the French Corporate Liability part of businesses and increasing exposure premiums to cover the same risks. In other sectors, worsening results have led the market to make a
Foreword Insurance market is hardening. in this area (ecological damage, damage In addition, insurers are strongly impacted
number of technical adjustments and further restrict underwriting
to biodiversity, etc.) are contributing to the policy. Exits from the market continue particularly in the real estate
Good-quality risks continue to obtain by claims for the cost of the withdrawal/ diagnostics sector. Overall, the good loss experience means that
development of insurance in this sector.
Lines of Expertise the same or even attractive budgetary recall/ contamination of products which pricing remains stable.
conditions while loss-making business now are significantly damaging their results,
Increases remain marginal and are applied to certain loss-making
often faces remedial action confirming a and many sectors are affected: agrifood,
Global Overview trend seen in 2018 and reinforced during
Market capacity automotive, cosmetology, pharmaceuticals,
accounts (real estate professions, real estate agents, real estate
diagnostics, etc.). The small number of players in this sector limits
the 2019 renewals. and mass distribution.
The capacity available to companies is competition. Coverage remains stable even though per-loss coverage
Our Group In general, insurers are continuing to grant slightly down: Tokio Marine’s withdrawal The review of the underwriting policies for is subject to discussion and increasingly difficult to negotiate.
long-term agreements (LTAs) of 2 or even from underwriting, the uncertainty these types of coverage, begun in 2019, For some more exposed sectors such as real estate and finance,
3 years or agree to negotiate rollovers. regarding future underwriting policy and has been confirmed in particular through insurers are tending more and more to limit their coverage.
On the other hand, pricing reductions the capacity rolled out by the AXA CS/XL reduced capacity, the increase in retentions Deductible levels remain low which means insurers can target them
remain exceptional and we are even seeing group is influencing the market. and geographical restrictions. if results are poor.
increases during LTAs. Compliance rules In addition, the worsening of combined Regulations are particularly cumbersome and new insurance
are being applied much more strictly. ratios across the branch raises fears of requirements are regularly produced such as Intermediaries in
The market remains competitive on good a reduction in the commitments of some Participatory Financing, or even the merger of some professions
quality risks and for mid-cap companies insurers who are already becoming more (bailiffs, auctioneers) and interprofessionality.
excluding sensitive activities such as and more selective in their underwriting. Specialist insurers are adjusting fairly well to these regulatory and
pharmaceuticals, oil, chemicals, medical, This phenomenon can already be seen organizational developments by making changes to policy wordings
automotive and agrifood. for some risks which have seen losses, and coverage.
making it necessary to resort to more
Insurers are keeping a closer eye on the co-insurance. However, the arrival of
number of increases in claims and we are new players such as Berkshire Hathaway
seeing more frequent claims assessments should be borne in mind.
and more requests for risk audits.
14 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 15
Pricing Coverage improvement
The upcoming pricing increase in the echnical Risks/Construction All
T
continental market was preceded by a Risks (France): an increase in demand
hardening of the London market. However, it for coverage in the field of renewable and
remains attractive for atypical hard-to-ensure geothermal energy and photovoltaics can
risks in the French market. be clearly seen again this year.
Nevertheless, few insurers are working
London Continental on developing new products to support Édouard Marron
Market Europe their clients. Director
Construction & Energy
Liability Severe restrictions on the coverage of
natural events may come into play from
General 2020. Insurers are becoming reluctant in
+5% to + 15% Stable at + 5%
liability
this area, calculating their exposure very
Excess / + 2,5 % to + 5% carefully and reducing their risk more and
Stable at + 5%
Umbrella + 5% à + 10% more often by increasing the deductible
or the rate or even making significant
Professional reductions in coverage.
+50% to + 200% + 5% to + 25%
Indemnity
04 Construction
ontractor’s Liability insurers continue to
C
Construction
look closely at operating procedures, from
Annual Stable design to implementation and the quality
+20% to + 40% of the products and materials being used
program at + 25%
on construction sites.
One-off
Stable at + 15% + 5% to + 10%
projects Coverage of financial loss remains limited.
The insurance market is adapting to
operational constraints and making efforts
In T
echnical Risks/Construction All to adapt to new needs.
General trend Market capacity Risks (France),the rates envisaged for
Foreword 2020 are certainly no longer following a Questions continue to be asked about the
downward trend but neither are they clearly scope of mandatory Decennial Liability
The insurance market continues to undergo Capacity in terms of T echnical Risks/ on the rise. The conditions which emerge insurance.
Lines of Expertise great change with the arrival of new players Construction All Risks (France) r emains clearly will essentially be more adapted to
With the current development of the
who, unlike traditional insurers, are more stable in this competitive market. the risk than to the client’s circumstances.
construction sector (Building Information
inventive and innovative, particularly when
Global Overview it comes to Construction All Risks. In Contractor’s Liability, capacity stands Pricing conditions for drilling and offshore Modeling or BIM and energy performance),
at around €500 million which is largely risks remain extremely high due to the insurers are developing new products to
With the emergence of new needs from insufficient for major French projects. shortage of players and/or the total support their clients, most often in the
Our Group clients seeking dynamism and speed, withdrawal of some players in these form of optional coverage, distinct from
these new players are managing to adapt The recent failure of players in the sectors. Following a significant decline in the decennial requirement, for fear of
to the demand and to offer new, simple Contractor’s Liability market have Contractor’s Liability in recent years, destabilizing the system set up under
and flexible products without necessarily strengthened the position of traditional prices are tending to rise. the Spinetta law. The trend is towards
being more competitive but wholly in line insurers and so limited the amount of digitalization of the offering.
with client expectations. capacity available. A hardening of the market can be seen for
risks where losses have occurred where it
Construction and civil engineering In Decennial Liability, both the corporate is sometimes difficult to seek compensation
companies continue to export their and engineering sectors remain open. (in particular due to a lack of insurance) or
expertise internationally in an attempt There is, however, reluctance in the market in more exposed business sectors.
to conquer new markets, particularly in to cover certain risks, particularly in the
Eastern Europe, Asia and South America, field of renewable energies and innovative ecennial Liability c onditions are following
D
leading insurers to rethink their business techniques. the same trend as Contractor’s Liability
model and expand their reach. insurance.
16 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 17
Regulation Claims
Renewable Energy
The ruling of May 16, 2018 transposes The high level and frequency of claims in
Directive (EU) 2016/97 of January 20, 2016 the Construction sector continues. Players
on the Insurance Distribution Directive in this sector are constantly reducing costs
or IDD into French law. In this respect (lower quality materials and less qualified Of the players operating in the Renewable Energy segment, only a few have developed
it reinforces and unifies the regulatory staff) but we are seeing the slow structuring a specific Renewable Energy line. Capacity is €70 million (Construction/Operation/
framework of commercial practices of after-sales services.
Financial losses).
within the insurance sector by creating
a new legal regime which applies to the Our observations remain the same as
Market capacity is more limited when it comes to m
ethanation. Few insurers want to
distribution of insurance products and no last year: a significant increase in the
commit to this type of high-exposure risk and a process which is still recent.
longer only to intermediation. average cost per claim (which has tripled
in 10 years) and in the number of legal Capacity remains stable in Hydroelectricity but varies from one insurer to another.
The IDD is structured around 5 main pillars: cases. This phenomenon means much
longer handling and settlement times The local market has little or no capacity for offshore renewable energy and insurers
rofessional capacity: Distributors must
P
and a resulting proportional increase in seem unwilling to get involved in this sector which is struggling to develop in France.
have the appropriate knowledge and skills
management fees.
to meet the needs of clients. Insurers remain reluctant to provide coverage for rooftop photovoltaics, particularly
uty of advice: T
D he distributor must The impact of this high loss ratio is inevitably because of the very high number of claims and the low level of pooling across the
provide clear information on the product reflected in an increase in premiums and a portfolio.
through a traceable advisory process hardening of the conditions being granted.
High-level and frequent claims in existing onshore wind farm portfolios could reduce
making it possible to source all objective SIACI SAINT HONORE is adapting
information on the product before making the scope of the coverage being offered by insurers.
its insurance programs while offering
a decision with full knowledge of the facts. alternatives to its clients through innovative Drilling operations and the resulting high-level losses severely restrict Geothermal
I nformation: D etails on the type of and adapted claims management service. capacity. Pricing conditions remain costly and there is low-level involvement by insurers.
insurance, summaries of coverage,
arrangements for the payment of
premiums, key exclusions, obligations,
policy duration, etc.
ransparency: R
T emuneration and
conflicts of interest: control of capital, and
justification (preliminary market analysis).
roduct governance and transparency:
P
The players are responsible for ensuring
that the product and its distribution meet
actual needs.
In the context of the IDD, SIACI SAINT
HONORE has worked to ensure its
Construction insurance offerings comply
with the standards by creating a database
of Insurers to guarantee a comprehensive
and impartial market consultation for each
piece of business, while standardizing our
responses in order to provide our clients
with added technical value based on clear
and objective criteria.
18 2020 MARKET REPORT SIACI SAINT HONOREPricing Insured vehicle
After several years of strong competition
database
between insurers, prices are stabilizing
or increasing slightly on balanced risks. The introduction of the Insured Vehicle
Database in France in early 2019 was
However, remedial measures, budgets or successfully implemented and is now fully
guarantees may be requested on business operational.
with chronic deficits. Authorized players such as the French
The technical approach may differ from Mandatory Insurance Fund (Fonds de Laurent Nicolet
one insurer to another for the same risk. Garantie des Assurances Obligatoires or Director
This requires ongoing risk analysis and FGAO), law enforcement agencies and Motor Fleet
increasingly frequent market consultations insurers can now access this data, which
by the broker. should make it possible to reform how the
risk is managed in the short term as there
will be more effective sanctions for failing
to insure a vehicle.
Coverage improvement The introduction of this new tool will
ultimately have a positive impact for clients
The coverage provided by automobile as the number of unsuccessful claims for
05 Motor Fleet insurers is by definition extremely stable compensation due to a lack of insurance
and innovation in this field is almost non- should significantly decrease.
existent.
On major risks where policy wording is
very broad, and exclusions are becoming Emergence of
the exception, improvements are relatively
rare. new type of risk
The last few years have seen
General trend Market capacity
Foreword the emergence and development
Insurers are placing increasingly high The automotive market is mature enough
Claims of a new way of using vehicles:
very short self-service hires or
Lines of Expertise Third-Party Liability deductibles on large
risks which can reach €50,000 or more.
to allow its players to operate there with
effective placement management.
The average cost of material damage
car sharing (including between
private individuals) where a vehicle
claims is constantly rising (around 3% per
can be hired several times a day,
As a result, we are seeing an increase Most insurers want to maintain or even year) although this is offset by a drop in
Global Overview in demand for self-insurance for clients increase their automotive turnover as frequency, particularly in large fleets where
chauffeured vehicles, electric
scooters, etc.
with large fleets of vehicles, leading to a long as they remain within predefined the prevention measures introduced several
years ago are successfully bearing fruit. This type of risk has required
Our Group drop in the premium volumes transferred standards.
efficient and costly IT tools to
to insurers.
However, where frequent high-level claims The increase seen over many years in closely monitor the hires and the
Although most insurers are resistant to have been made, the business becomes serious bodily injuries continues to grow and resulting claims.
it, the setting up of self-insurance funds more and more complex to place. poses real problems in terms of balancing Despite the implementation of these
directly managed by the broker can be the accounts, making it difficult to place tools, it is clear that the claims
an effective solution for clients with the This is the case of short-term hires, some types of business. experience is not what the insurers
elimination of a large part of frictional costs. passenger transportation (including
It is not unusual to see claims exceeding would have wished.
fleets of chauffeured vehicles) and freight,
Some insurers will still agree to reinsure particularly delivery services. €5 million which greatly destabilizes not just Many operators abandon the activity
this type of self-insurance fund in return the account but also the broker’s portfolio. after only a few months in business.
for an excess premium which provides The sector is highly concentrated.
Retention by insurers, which is generally The French Mobility Bill currently
protection for the policyholder if something
very high, means they bear the full cost, with before Parliament should provide
goes wrong.
reinsurers only intervening on exceptionally a more precise legal framework on
The trend is also towards higher high-level claims. the use of new means of mobility
deductibles, especially for large fleets. and the resulting obligations for both
operators and hirers.
20 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 21In terms of pricing, the upward trend More recently, the entry into force of the
continues and although the North American new legislative provisions of October
markets saw demand for a pricing increase 2018 on the prevention of tax evasion will
of nearly 25% on average for a return to raise questions about the scope of the
profitability at the beginning of the period, coverage provided under Directors’ and
in the end the average increase has not Officers’ Liability Insurance policies and
been as high in Europe. It is estimated to how it interacts with the Third-Party Liability
have been less than 5% until July 2019 policies held by financial institutions.
for the major risks of French groups, with
increases exceeding 25% remaining To answer these questions, it should be
exceptional. borne in mind that insurance policies are Mickaël Robart
designed to provide the widest possible
A sharp increase has also been seen in Director
coverage of the consequences of directors’ Financial Risks
premium rates for IPO programs for listings and officers’ liability in the course of
in Europe on EURONEXT. their duties, regardless of regulatory
The situation is even more complicated for developments.
businesses being listed for the first time in
The growing number of claims remains a
the US, especially on the NASDAQ. The
global phenomenon. It is however, more
number of insurers likely to be involved
prevalent in the United States and is linked
in these operations is very small and the
to the growing number of Securities Class
conditions of coverage much poorer, with
Actions but also affects other issues such
06 Financial Risks
premiums reaching exorbitant levels.
as M&A transactions.
Driven by the loss experience, coverage
in fraud programs was reviewed in 2015 In Europe the settlement of major claims
with restrictions on the coverage of external is illustrated by the case of the “carbon
fraud. Insurers have not moved from this emissions fraud”. We continue to see the
position. same increase in the frequency of claims
particularly in Italy in relation to tax and the
In Directors’ and Officers’ Liability the proliferation of class actions in Northern
quality of the coverage being negotiated Europe. Tax litigation is on the rise and
remains excellent. Many extensions have businesses leaders are being increasingly
Directors’ and For the first time in over 10 years since become standard and insurers have affected in this area, including in France.
Foreword the financial crisis, these measures have agreed to review a number of exclusions
Officers’ Liability affected all geographical zones, North and have clarified their position through Claims against business leaders following
America, Europe, Asia, and the Middle the settlement of complex claims. Excess data breaches are significant but are
Lines of Expertise In 2019, driven by the international leaders,
East. insurers are flexible and more likely to confined chiefly to North America
the Financial Lines market escalated the While long-standing leaders such as deliver drop-downs on sub-limits or
Global Overview implementation of corrective measures to AIG, CHUBB, AGCS or ZURICH have renewed capacity if limits are exhausted.
bring about a return to profitability in the
face of more frequent claims across all
now significantly reduced their respective
market shares, they nevertheless remain
The increase in the number of new
regulations and the high level of claims
2020 Outlook
Our Group lines and more particularly in Directors’ opinion leaders with the ability to take the have led insurers to review the scope A continuing trend of claims and defense costs on the increase.
and Officers’ Liability (Securities claims, market with them. of coverage of regulatory procedures
M&A, violation of anti-fraud regulations involving listed but also unlisted companies: An uncertain global economic climate and the rise of repressive
Total market capacity remains stable
and regulatory procedures). anti-money laundering, anti-corruption and regulations. The economic struggle driven by sanctions imposed by
overall in spite of takeovers and in particular
embargoes. The issue of US sanctions regulators using extraterritorial regulations will contribute to maintaining
Insurers have reviewed their underwriting the creation of the new player, AXA XL.
on Iran will undoubtedly drive insurers to a global upward trend in claims.
strategy and are now analyzing their entire These mergers have, however, led to the
redesign of insurance programs driven impose new restrictions or exclusions. Continuing upward pressure on premiums throughout the year,
portfolios with sometimes drastic decisions
by a reduction in the overall cumulative with particular attention being paid to the first insurance lines being
in cases of worsening loss experience Insurers are offering new policy wordings
capacity of these players. purchased by major listed groups or those with assets in excess of
(zero tolerance and an attempt to reach and have defined a strategy for and drafted
€10 billion.
a balanced premium/claims ratio), pricing In addition, most insurers are now coverage of financial sanctions: AFA (the
conditions considered to be particularly low French Anti-Corruption Agency), FCPA, Excess lines will not be sufficient to offset these increases due to
limiting their front-line exposure to a
or companies undergoing great change/ GDPR, tax administration, and so on, for historically low rates that will also be under review.
maximum of €15 million. This trend has
restructuring which present an aggravated been accompanied by the positioning or example by requesting the agreement Due to the global trend being followed by all players, we also feel that
risk profile; worsening of results, strong strengthening of some international players of the regulatory authorities before any competition between markets in different zones will have little effect
international growth through acquisition, such as HCC, QBE, Navigators, Beazley, payment of compensation related to a on the competitiveness of the offerings.
stock market listing, etc. or ANV and Sompo. sanction.
22 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 23Mergers & Acquisitions Cyber
The global Cyber insurance market continues to grow and will soon reach $4 billion in premiums. Europe is
The US market has become extremely competitive and the purchase of W&I solutions has been extended to
late in adopting Cyber coverage. It currently accounts for only 10% of the premiums collected and France
certain sectors which had been previously refused or ignored, such as pharmaceuticals, energy, and even
less than €100 million. Global theoretical capacity remains high, at close to €800 million, with more suppliers
financial institutions, but also to all geographical zones.
but with each of them offering individually decreasing capacity.
In 2019 almost all M&A insurers withdrew from operations with strong Chinese connections due to a recent
The front-line premium rate will face upward pressure at renewals in this last quarter and early 2020. Moreover,
claim based on false accounting entries.
degression on Excess lines should also remain weak. Accordingly, by allocating premiums between vertical
The arrival followed by the rapid withdrawal of insurers from these markets had hampered the development of this insurance lines, insurance companies are showing that they see the Cyber risk profile as catastrophic in
solution. The Asian insurance giants are also developing solutions to support Chinese investments in European the extreme. This is a direct consequence of losses in the US but also lessons learned from the devastating
and US markets. We believe that some insurers should be able to sustain a long-term position in China and NotPetya incident of 2017.
Southeast Asia with the support of specialized brokers and the development of local expertise.
That being said, given the level of development of Cyber insurance today, needs are far from being met even
In continental Europe and the United Kingdom, liability guarantee insurance initially used by investment funds if business interruption coverage were to be included in a standalone cyber insurance program, the limits
is becoming more and more integrated into companies’ acquisition processes. Having been widely used in available on the market would only cover a small portion of the estimated losses.
transactions in the United Kingdom for more than 20 years, it is now established in the Netherlands and the The Cyber market provides coverage of only €500 million for Business interruption losses compared to €2
Nordic countries. billion or more in the Property & Casualty market.
Although the first French transactions insured by the London market date back to the beginning of the 1990s, However, the non-damage business interruption market is not intended to cover operating losses resulting
liability guarantee insurance has undeniably gained popularity in France in recent years, with an average of from a malicious or accidental Cyber event.
150 insured transactions, including a growing percentage coming from corporate clients making acquisitions.
Southern Europe has long been behind but is catching up with France and many transnational transactions are The most cautious insurance companies, pushed by their reinsurers, are adding non-cumulation and
taking place in Spain, Portugal and Italy. maximum aggregate loss clauses to their Property damage and Cyber insurance policies to avoid claims
being made under two programs.
New players have recruited dedicated underwriting teams and overall theoretical capacity has increased to more
than €800 million. However, we have seen the withdrawal of some Lloyd’s syndicates which had relied on MGAs However, property and casualty insurance programs must cover material damage resulting from a Cyber event
to develop their business, including on the continent. At the same time, insurers are segmenting their offerings with no upper limit. Property & casualty insurers must therefore clarify their coverage in a positive manner.
and developing their expertise in Real Estate transactions (which now account for half of insured transactions) A similar analysis can be drawn between third-party and professional liability insurance policies for events
and tax indemnity coverage solutions. causing bodily injury and/or material damage.
The number of claims is on the rise and effective claims management has boosted confidence in this product The argument over the lack of Cyber risk pricing in traditional Third-Party Liability and Property & Casualty
and the fact that it is being recommended by lawyers and investment banks suggests this will continue. policies is irrelevant in a market which is reviewing and analyzing its key accounts. Rather, the reason is to
be found in the lack of analysis of Cyber risks by traditional lines and the desire to maintain their profitability
Claims are mainly related to tax or the reliability of financial statements, although claims relating to employment
in this uncertain climate.
and employment contracts, in France and Spain in particular, are on the rise. Among the points to bear in mind
in terms of underwriting is the analysis by insurers of Cyber risk exposure with the insurers requiring insurance Insurers’ efforts to adjust pricing conditions will also provide the opportunity to clarify the scope of the
due diligence to be carried out on the dedicated coverage purchased by the targets. coverage in order to limit discussions on potential silent coverage.
The merger of two companies is a crucially vulnerable time in risk governance. The French National Cybersecurity
Agency, ANSSI, recently reminded companies of the need to include IT security in the acquisition process or
face the threat of negotiations being directly impacted, or the new entity being compromised financially or in Together we will have to face the following key challenges:
terms of its reputation. In addition to separate security and vulnerability profiles, each entity may have specific
security priorities which need to be harmonized. There are more and more data regulations and, in terms of ❙ Review exclusions from traditional P&C, Third-Party Liability and Marine programs to exclude only
compliance risks, we need to have a vision which encompasses and exceeds the European regulation, GDPR. what is covered under dedicated Cyber programs;
❙ At the same time, limit Cyber products including coverage of bodily injury or material damage;
❙ Ensure that cases of Cyber-Fraud affecting third parties are properly covered;
❙ Maximize business interruption coverage and develop solutions which include Supplier and Client
failure in the business interruption coverage;
❙ Clarify the terms of Cyber policies, for example the concept of Cyber war versus Cyber terrorism or
the definition of the insured’s information system;
❙ Be aware of the underwriting intentions of insurers faced with the increased take-up of Cloud solutions
by insureds and the consequences for full coverage of the risks they generate.Marine & Cargo We are also seeing a trend reversal
with a reduction in the market shares
underwritten by each insurer and an
The trend described in our 2018 edition, increase in the number of co-insurers
continues as we saw a further hardening of whenever a significant amount of capacity
conditions in the Marine insurance market becomes available.
in the first half of 2019. This trend is the
The capacity available depends on the
ever-present consequence of the poor loss
business sector; apart from the Automotive
ratio reported by insurers.
sector and certain raw materials, it is still
In London, the first wave of capacity accessible, with insurers favoring quality Pierre Deleplanque
reductions in 2018 was followed by industrial business with no particular Director
a second, larger one, affecting some technical profile. Marine & Cargo
segments of the market more than others.
Excess capacity (over €50 million) is more
Many Lloyd’s syndicates have ceased all difficult to access and its price has often
underwriting and others have been forced increased from 20% to 50%.
to reduce premiums while continuing to
The merger between AXA and XL has
adjust pricing.
not yet had any real impact on the market.
07
This is taking significant amounts of
We will be able to measure the effects of
business away from the English market
Marine & Cargo
the new world leader’s policy in 2020 as
to the continental market, with varying
it has been slow to get started.
degrees of success. With a delay of
approximately 6 months, the continental More than ever, capacity purchasing
market reacted less drastically but in a strategy needs to be viewed across
very noticeable manner. Europe as a whole and not only in the
French market.
We are seeing the marked return of
more disciplined underwriting across all Large-scale, quality business can always
segments. be placed with good terms, including with
pricing reductions when the quality of the
This reversal of trend manifests itself in
Foreword several ways:
statistical results allows.
❘ more selective underwriting
A The general trend, however, remains
Lines of Expertise policy, with the goal of profitability to bullish to different degrees depending on
the fore the market segment.
In general, the creativity of brokers is being
Global Overview ❘ areful reading of the conditions
C
strongly challenged by insurers seeking to
of coverage w ith requests for
amendments to or withdrawal of return to basics.
Our Group certain types of coverage allowing
In particular, storage coverage is
the policies in question to be renewed
increasingly difficult to obtain from insurers
under economic conditions acceptable
with reduced capacity on offer and the
to the insurers
proliferation of warranties, sub-limits and
❘ equests for an increase in
R deductibles.
deductibles o r in the level of self-
insurance through the increased use With geopolitical tensions and incidents in
of captives the Persian Gulf, insurers have terminated
War Risk coverage and targeted energy
❘ ricing increases nevertheless
P products (oil and gas) operating in the
targeting the least prof itable region.
compartments of the market, as a result
of capacity withdrawals.
SIACI SAINT HONORE 2020 MARKET REPORT 27The trend is still to expand integrated
international insurance programs.
Hull and P & I The stability of P&I premiums observed at
the last renewal should in turn give way to
Regulation minimum increases of 2.50% to 5% at the
Large and now mid-cap companies are After more than 10 years of almost February 2020 renewal.
adopting this strategy of managing their Local insurance regulations are continuous reductions in Hull and P&I
transportation risks, assisted by brokers being tightened up and there are premiums, the change in market behavior As far as Hull is concerned, an increase
who are in a position to provide an few countries where Non Admitted was confirmed at the end of 2018. in premiums of around 5% is expected on
administration service, which for historical Permitted (NAP) is still possible. good business. Some fleets with difficult
reasons or reasons of efficiency (a single P&I renewals in the first quarter of results are seeing their insurance budgets
broker per country for all LOBs) is often The effective management of 2019 were based mainly on unchanged triple during renewals with major placement
multi-network. reinsurance and retrocession premiums (but with possible adjustments difficulties. The Yacht market is facing a
mechanisms is now essential depending on the performance of each sharp reduction in capacity and premiums
The latest IUMI report describes losses to optimize the operation of policyholder). As for the Hull market, are tending to increase from 20% to 100%,
in a market greatly impacted by NAT CAT international programs in an its reversal was confirmed with almost including business where no claims have
events which increasingly worsening loss increasingly restrictive environment. systematic increases for all fleets, even been made.
ratios cannot absorb. those with excellent results.
The tightening of sanctions, Finally, even if basic war risk rates (annual
Added to this is the general average of especially by the USA against Iran, The London market was largely responsible premium) have remained unchanged,
the MV GRANDE EUROPA and MV Russia and some other countries, for the market downturn, particularly Lloyd’s with the geopolitical crisis in the Persian
GRANDE AMERICA and the large- is driving insurers and brokers to where 12 syndicates either stopped (10) or Gulf, very significant additional war risk
scale misappropriation of wheat stocks be extremely strict when settling limited (2) Hull business underwriting as premiums now apply in this very busy
in Ukraine. claims but also upstream when the of January 1, 2019 and where 80% of the region.
insurance is being purchased. syndicates reported global losses in 2018.
It is in this worsening context that the Many international markets (particularly Regulations, particularly European
market over-reacts, particularly in London Bulk sign-off agreements are still in Asia) which depend directly, to varying regulations, related on one hand to sanctions
where Lloyd’s is on the frontline for all these possible on a case-by-case basis, degrees, on the underwriting capacity and on the other to the increasingly specific
risks. after thorough due diligence granted by Lloyd’s have in fact also demands for identification of the final
has been carried out on the reduced or simply stopped underwriting beneficiaries of insurance policies, are
policyholder’s relationship with the Hull business. generating additional bureaucracy and
entities in sanctioned countries. restrictions to which the policyholders of
The continental European market (in the maritime world were unaccustomed.
particular Scandinavia and France),
which had more satisfactory loss ratios With the introduction of sanctions, it has
and financial results than London, is become difficult or even impossible to do
benefiting from this turnaround and, with business with Iran and Venezuela.
global capacity unchanged, is gaining
market share. Business involving Cuba is facing
increasing difficulties and is currently
While there is no significant change, it is prohibited at Lloyd’s.
important to note that All risks coverage
is becoming increasingly difficult to obtain
for single and older vessels.
As for war risks, the period of detention
after which a total loss could be declared
had been reduced from 12 to 6 months,
but is now apparently being increasingly
pushed back to 12 months.
28 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 29The Terrorism and Political Violence Overall capacity in the Terrorism and
market has grown strongly in London over Political Violence market has increased
recent years and continues to grow in Paris in recent years in respect of both pure
with the arrival of new players such as Terrorism risks and Political Violence
AXA XL in 2018. including war risks as well as the coverage
of Non-damage Business Interruption.
The market is developing in order to
keep pace with the new threats facing The Political Risks, Terrorism and Political
companies, with products that can Violence market in Paris has become a
increasingly cover non-tangible assets reliable alternative to the London market.
such as non-damage business interruption. The Paris market currently has 7 insurers Emmanuelle
with a Terrorism and Political Violence Biehler-Marghieri
specialty. It is therefore possible to set up Director
programs with large capacity from Paris at
Market capacity competitive prices without having to turn
Political Risks
to the traditional London market.
Overall capacity in the Political Risks
market remains stable, but with a distinction
depending on the public or private status
of the insured risks.
With regard to the non-payment risks of
08 Political Risks public purchasers, theoretical capacity has
increased over the past year to $3.2 billion
and a maximum duration of 20 years. In
contrast, theoretical capacity for insuring
private buyers has declined slightly to $2.2
Capacity per transaction
billion.
Max capacity Duration
For non-trade related risks, credit risks $bn per year
are not linked to a specific transaction
Political Risks
but are similar to financial loans that
General trend ❘ The impact of Brexit on capacity in the
UK market, and in particular the Lloyd’s may, for example, cover working capital Non-payment (public buyer) 3,2 20
Foreword syndicates in London which may not be requirements. For these risks, market Non-payment (private buyer) 2,2 20
For Political Risks the end of 2019 and capacity has increased slightly to $1.7
able to operate as efficiently as before Financial guarantees / non trade related 17 15
the beginning of 2020 will be marked by billion covering transactions for up to 20
Lines of Expertise a number of geopolitical events including:
given the uncertainties around the
years.
“Pure” political risks 3,2 25
UK’s scheduled exit from the European
Project funding 1,8 25
❘ The trade war between the United Union. The table opposite provides a breakdown
Terrorism and Political Violence
Global Overview States and the People’s Republic of In 2019, the Political Risks market is in of theoretical market capacity per type of
China, which impacts more on Beijing Terrorism 4 5
a period of transition. There has been a coverage and per transaction which is in
than Washington, where negotiations slight increase in premium rates on both practice moderated by the market’s appetite Political violence 3,5 5
Our Group are taking a long time to complete credit risks and pure political risks; in spite for a risk or a country, the aggregate Non-damage Business Interruption 150 2
❘ The protests in Hong Kong against the of everything there is still an appetite on risk for a country and the duration of Terrorism and Political Violence (Paris market)
Chinese Communist authorities where the part of insurers to support clients in the transaction. In the Paris market, this 3 / 5 in
the outcome is uncertain theoretical capacity is moderated by the Terrorism/Political Violence 900
the market: exporters, traders and financial construction
❘ The recession in Germany and Japan, institutions. market’s appetite for a risk or a country and Policy
the type of assets being covered. Non-damage Business Interruption 2
which will affect most of the world’s sub-limit
The terrorist risk remains topical in 2019 and
economies and mark the beginning of poses a definite threat to civilian populations Source SIACI SAINT HONORE
a global recession in 2020 and countries worldwide. The development
❘ The general slowdown in world trade of this scourge is complex due in particular
due in particular to a growing number to the development of the type of terrorist
of populist and protectionist regimes attack that has gone from mass to individual
(Argentina, Italy, Turkey, Japan, Brazil, attacks, with the need to follow specific
Russia, India, etc.) profiles. In France, 10,000 individuals are
❘ The tense geopolitical situation in the being monitored by the Intelligence Agency
Middle East, especially around the Strait as “potential terrorists”.
of Hormuz, through which more than a
third of hydrocarbons pass on their way
to the economic powers
30 2020 MARKET REPORT SIACI SAINT HONORE SIACI SAINT HONORE 2020 MARKET REPORT 31You can also read
