Rate erosion in non-property classes likely over increased competition: Markel
November 4 2024 by InsuranceAsia News
There is an abundance of capacity and a high level of interest in the region from reinsurers that are based outside of Asia Pacific, leading to increased competition and some rate erosion in the non-property classes, said Kevin Leung, chief underwriting officer for Asia Pacific.
However, he said: “The property reinsurance market remains firm due to the elevated level of losses in terms of both frequency and severity driven by climate change.”
“Bushfire-exposed business remains a concern to most reinsurers,” he added.
“We’re noticing that the attitude towards US-exposed casualty business remains highly cautious,” said Leung, adding that reinsurers are actively managing down the treaty and facultative limits deployed for any US-exposed placements.
Expanding on the key themes for the upcoming renewals, Leung said that PFAS exclusions are likely to become more common as the risks have become more apparent.
Meanwhile, “automotive exports to the US remain an area of stress due to the nuclear verdicts impacting almost all the major car manufacturers in the region, he said.
Product “recall is another area, where capacity is scarce due to recent large losses,” according to Leung.
Curiously, Leung noted that financial lines seem to be the area that is most attractive right now for carriers across the international markets “with rates, especially financial institutions rates, falling by high double digits at renewal”.
“In Asia, this is a concern given the challenges in the Greater China property market, which could have a negative effect on the broader regional economy,” Leung pointed out.
Elsewhere, the CrowdStrike incident has had limited effects on the cyber insurance and reinsurance market with the rate continuing to soften.
“However, we’re noting that more attention is currently being paid to terms and conditions where they relate to system outages and social engineering fraud coverage,” he said.
“Competition is likely to intensify across all asset classes, with pent-up interest across some new markets for access to business in Asia Pacific likely to dominate and drive longer-term growth.” Kevin Leung, Markel
Market in transition
While there has been a lot of apprehension about the softening in the direct markets in the region across classes of business, Leung said that at Markel, they would “characterise the current market as one that’s in transition, rather than a softening marketplace”.
“Whilst there are some pockets of stress, as a direct result of global rates remaining firm, we think there will be many insurance classes that will remain sought after.
“Marine war is one of those areas, with geopolitical instability remaining across various jurisdictions,” he said.
“The terrorism market will be one to monitor with increasing risks, such as the outcome of the US election, while cyber remains an interesting marketplace to watch as we believe this is close to stabilising,” he added.
Despite the nervousness around US exposure, the broader APAC casualty market is likely to stay relatively firm with a host of issues weighing on the global market, while reserves for the US casualty business for the years 2020 to 2023 may start to rise.
“Competition is likely to intensify across all asset classes, with pent-up interest across some new markets for access to business in Asia Pacific likely to dominate and drive longer-term growth,” Leung said.
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