2016 EMEA insurance market outlook remains favourable

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Marsh on Monday released its annual Europe, Middle East and Africa (EMEA) Insurance Market Report 2016, which forecasts generally favourable commercial insurance market conditions for insureds across the EMEA region in 2016.

According to Marsh’s report, capacity remains plentiful in many markets across the EMEA region amid intense competition among insurers, in particular for those organisations with attractive portfolios and good loss histories. However, industry developments, including recent earnings announcements, senior management changes and re-underwriting at several companies bear watching. Macro dynamics, including global economic, political, regulatory, technological, and environmental developments, are likely to affect the industry throughout the year.

Rates for directors and officers (D&O) liability insurance remained stable or reduced in the majority of countries across the region; average reductions of up to 10 per cent were reported in 12 countries, while Switzerland recorded reductions of as much as 20 per cent. Only Norway and Slovenia experienced rate increases for D&O insurance in the EMEA region in 2015.

Marsh reports widespread motor insurance rate increases across EMEA in 2015: rates increased by an average of up to 10 per cent in 11 countries; by 10 per cent-20 per cent in Turkey; and by as much as 20 per cent-30 per cent in Romania. These rate increases are attributed to high loss ratios in motor third-party liability business and additional regulations across the region, which are driving up the cost of underwriting for this line of business.

Cybersecurity, terrorism, and political violence are key risk issues that will dominate market discussions throughout 2016. Marsh reports a dramatic increase in the number of enquiries about the role insurance can play in managing cyber risk across the region; and, in light of the 2015 terrorist attacks, terrorism and political violence risks are now on the risk matrixes of the majority of organisations, and interest in relevant coverage options has grown as a result.

Jeremy Cooke, Head of Placement, Marsh’s International Division, commented: “Organisations, especially those with attractive risks and good loss histories, should generally expect a positive pricing environment in 2016, as long as capacity and competition remain plentiful and catastrophe losses remain low. Those organisations choosing to incorporate data and analytics within their risk management and risk transfer strategies in 2016 will be best positioned to achieve the most optimal outcomes at renewal.”

“Now, however, is not the time to remain complacent. Organisations need to stay abreast of the ever-changing marketplace and risk landscape, where new and emerging risks can quickly escalate if not properly managed.”

In the UK, Marsh reports that rates declined on average by 0 per cent-10 per cent, or have remained stable, across all major lines of insurance, with the exception of employee benefits rates for health, life, and accident and health insurance. As a result of new entrants, insurer competition and abundant capacity in the UK market, more firms are negotiating increasingly advantageous renewal terms on their insurance programmes in return for their continued loyalty.

Among the other findings of the report:

  • Organisations across the EMEA region are becoming more aware of their vulnerability to cyber-attacks, and there is an increasing demand from organisations for underwriters to participate in this emerging marketplace. The implementation of the European Union’s Data Protection Directive in 2018 is expected to further fuel demand for cyber insurance.
  • While the number of insurers offering credit and political risk insurance in the private market has increased substantially over the past two years, the frequency of losses on which there are notifications and where there is a tail of exposure is increasing. Marsh expects a continued softening of rates in 2016, albeit at a slower pace.
  • Due to slower consumer demand, higher debt, and adverse interest rate trends, insolvencies are expected to increase globally by between 3 per cent and 4 per cent in 2016. Premium rates for trade credit insurance in the region are stabilising and competition among insurers is strong but selective; however, if the frequency and impact of losses continue to rise, then rates may increase too.

Marsh’s Insurance Market Reports analyse market trends across major lines of insurance in more than 60 countries globally.