The Great Softening

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.


March 27, 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.

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