The Hard Market Part 1

Welcome to BLW’s inaugural newsletter, designed to initiate conversations and support collaboration between brokers, insurers and customers.


Why has the market changed?

Thankfully, our industry has retained many talented people who will recall the vintage of the hard and soft market cycle. However, we are now experiencing the first truly hard market for many of our colleagues.

Let us first explore why the market has changed:

  1. Many insurers have made underwriting losses for some years now.
  2. These losses have forced Combined Operating Ratios to often exceed 100%.
  3. Historic reserves and capacity in the market have allowed this to continue for some time – but it is no longer sustainable.
  4. Solvency II* requirements along with now significantly reduced capacity has further compounded matters.
  5. The Ogden** rate change, and many years of soft markets, are also now having an impact.

* Solvency II (general insurance) is a Directive in European Union law that codifies and harmonises the EU insurance regulation. Primarily, this concerns the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.

** The Ogden tables help actuaries, lawyers and others calculate the lump sum compensation due in personal injury and fatal accident cases.


How will this impact the market?

  1. Rates will harden drastically resulting in many significant premium increases.
  2. Some classes of business will be very badly affected with some insurers withdrawing completely.
  3. Perils will be reduced, and often excluded.
  4. Co-Insurance Clauses and increased Excesses will be imposed as conditions at renewal.
  5. The risk appetites of many insurers will change and reduce.

What can we do to help support Customers,
Brokers and Insurer Partners?

Firstly, it has never been more important to put the customer at the very centre of our thinking.

The purpose of insurance is to facilitate risk transfer, to allow business and commerce to remove risk from their balance sheets, and to provide the bedrock for a successful economy.

Our industry must avoid the temptation to become internally focused and forget the customer. It is crucial that brokers work together for the benefit of the customer and communicate with insurers and regulators on an even more regular basis.

Our top ten points for supporting customers in the challenging months ahead:

  1. Identify risks where you anticipate a problem and engage with the customer immediately (many months before the renewal date).
  2. Having engaged with the customer, open discussions with the existing insurer.
  3. Do not wait for insurers to issue renewal terms on problematic cases (or to decline renewal).
  4. Partner with insurers, and collaborate with them, to influence positive outcomes. 
  5. Develop a clear marketing strategy for the risk. Not every risk will fit last year’s market.
  6. Be creative – you may need to separate the classes between liability and material damage.
  7. Do not see sub-broking as a second-tier option, this market requires specialists. 
  8. Engage with specialists early – seek out new partners who complement your offering. 
  9. Do not put the risk to market, potentially collecting several declinatures, ahead of engaging with a specialist. 
  10. Most important of all, in a hard market, put the customer at the centre of everything you do and ensure early and regular communications with all parties.