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Tough conditions continue for insurers and insureds alike as renewal season approaches.
Published on August 15, 2023
By Hui Zhi Pek, underwriter, war and terrorism
Markel, Singapore
At the midpoint of 2023, there seems to be no sign that the compound effects of three years of sociopolitical unrest and subsequent ramifications for the political violence (PV) and terrorism insurance markets are lifting.
The PV market has suffered an estimated USD 10 billion of strike, riot, civil commotion (SRCC)losses since 2015, compared with less than USD 1 billion for terrorism.1 Consequently, both insureds and reinsureds are facing unprecedented and significant increases in reinsurance premiums which are not expected to ease in the upcoming renewal season as reinsurers try to recover the heavy losses of recent years.
As a result, available capacity in the market has shrunk considerably; terms and conditions have been tightened, and aggregation is being more closely managed. While global reinsurers with a good spread of exposures around the world are more poised to withstand the challenges of the current market, difficult conversations are required to explain to brokers and clients why premiums are seeing huge market correction regardless of their location, occupancy or size of business.
Closer to home, in Asia and the MENA region, there have been several headline events in the past five years:
- 2019: Hong Kong protest due to a proposed introduction of an extradition bill
- 2020-2022: Inflation protests in many parts of Asia as a result of COVID, leading to loss of jobs, inflation, etc
- 2021: Military coup in Myanmar
- 2021-2022: Multiple protests in Indonesia over issues including employment laws, fuel subsidy, inflation and environmental issues.
- 2022: Sri Lanka protest due to perceived government mismanagement of the economy and inflation
- 2023: Unrest in Pakistan as a result of the arrest of ex-PM Imran Khan
- 2023 June - July: Following a recent general election in Thailand there remains high alert of possible unrest
Most of these events have resulted in claims one way or another, and while they are not market-level losses individually, they add up over time and affect a large number of market participants. Other events, such as elections and the transfer of political power, are typically a spark for unrest. Notwithstanding these major events, there are also recurring smaller scale terrorist and sabotage attacks in the region. Many of these do not makes the news; not because they do not exist, but because they tend to be overshadowed by larger or more high profile incidents.
It is premature to make any longer term predictions, and the market is too volatile, but the current outlook does not suggest market conditions will soften any time soon. The 1st January renewal season will soon be upon us again and although pricing is key, underwriting discipline will be paramount to ensure long term availability of coverage and business continuity for both insurers and insureds.
1 A world of trouble | Howden Broking (howdengroup.com)
About Markel International:
Markel International is a division of Markel Group Inc, a US-based holding company trading on the New York Stock Exchange (NYSE: MKL). Markel International writes insurance and reinsurance business through six divisions and through offices across the UK, Europe, Canada, Latin America and Asia Pacific. Markel International’s insuring entities include Syndicate 3000, Markel International Insurance Company Limited, Markel Insurance SE., and Markel Resseguradora do Brasil S.A. Its UK national markets business also provides legal and professional fees insurance cover as well as legal and tax consultancy services.