The Great Softening

The Great Softening

The Great Softening

27 Mar 2024

Q1 2024 ends with a persistent soft-cycle in the casualty market, driving a race for competitive discounts and challenges for brokers, insurers, and MGAs. Brace for a rollercoaster 2024.

As we mark the end of Q1 2024 - the casualty market continues the aggressive ‘soft-cycle’ with no end in sight. Whilst this means competitive discounts for the insureds - brokers and indeed insurers/MGAs alike are revising their forecasts to factor in the soft market cycle which will undoubtedly have an impact on revenue and investment in client servicing (as intermediaries/insurers look to cut costs to ride the soft-market wave).

Off the back of the financial dynamics of the soft-market, there is an another (albeit linked) phenomenon taking shape, which again compounds the market sentiment: Commoditizing specialty insurance. By this, we have seen intermediaries taking a high-volume approach and operate at unusually low margins to retain market share and renewals.

What does this mean?

In short, it’s a race to see who can get the biggest and sharpest discounts to win business. This often leads to the insured being enticed away from holding brokers/insurers by competitive discounts. With steep discounts and high-volume approach comes the increased risk of errors and omissions from (wholesale) brokers and MGAs who are under pressure with gross written premium commitments. Equally, MGAs and insurers are in a similar position, who feel compelled to underwrite risks that would typically be declined / request a marked increase in rate / commit to a smaller line size.

For example, where we have successfully placed complex, multi-layer casualty risks – the cover and conditions were the main driving force. This has now become a price war - hence treating specialty insurance as a commodity off the shelf, where in fact it requires a deep dive in understanding the covers, limits, exclusions and endorsements required, to ensure that the policy can react in the event of a claim.

Should we expect a market correction?

Don’t hold your breath. This could be the correction to ‘normalise’ the market from the COVID-era hardening market. Time will tell – which will be driven by available capacity in the market and macro behaviors of the money-market. Instead, strap in for a rollercoaster of 2024.

As a specialty, independent owner-managed Lloyd’s Broker ourselves, we work with a multitude of specialist brokers, clients and MGAs. Our approach is and has always been the ‘boutique’ approach, where we service our clients with full market access, whilst also utilising our in-house Lloyd’s facilities.

As we mark the end of Q1 2024 - the casualty market continues the aggressive ‘soft-cycle’ with no end in sight. Whilst this means competitive discounts for the insureds - brokers and indeed insurers/MGAs alike are revising their forecasts to factor in the soft market cycle which will undoubtedly have an impact on revenue and investment in client servicing (as intermediaries/insurers look to cut costs to ride the soft-market wave).

Off the back of the financial dynamics of the soft-market, there is an another (albeit linked) phenomenon taking shape, which again compounds the market sentiment: Commoditizing specialty insurance. By this, we have seen intermediaries taking a high-volume approach and operate at unusually low margins to retain market share and renewals.

What does this mean?

In short, it’s a race to see who can get the biggest and sharpest discounts to win business. This often leads to the insured being enticed away from holding brokers/insurers by competitive discounts. With steep discounts and high-volume approach comes the increased risk of errors and omissions from (wholesale) brokers and MGAs who are under pressure with gross written premium commitments. Equally, MGAs and insurers are in a similar position, who feel compelled to underwrite risks that would typically be declined / request a marked increase in rate / commit to a smaller line size.

For example, where we have successfully placed complex, multi-layer casualty risks – the cover and conditions were the main driving force. This has now become a price war - hence treating specialty insurance as a commodity off the shelf, where in fact it requires a deep dive in understanding the covers, limits, exclusions and endorsements required, to ensure that the policy can react in the event of a claim.

Should we expect a market correction?

Don’t hold your breath. This could be the correction to ‘normalise’ the market from the COVID-era hardening market. Time will tell – which will be driven by available capacity in the market and macro behaviors of the money-market. Instead, strap in for a rollercoaster of 2024.

As a specialty, independent owner-managed Lloyd’s Broker ourselves, we work with a multitude of specialist brokers, clients and MGAs. Our approach is and has always been the ‘boutique’ approach, where we service our clients with full market access, whilst also utilising our in-house Lloyd’s facilities.

Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE



+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies

Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE



+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies

Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE


+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies