Plus, capacity is not keeping pace with the rapid increase in demand for cyber insurance, adds Hiscox chief underwriting officer
The London market has to drive the pace of transformation in the insurance industry after last year pressed the “alt, control, delete keys on the world”, brokers and underwriters have been told.
Speaking at a virtual event hosted by ratings firm Standard & Poor (S&P) last week, Jillian Williams, chief underwriting officer and head of environmental, social and governance (ESG) at Leadenhall Capital Partners, said the sudden move to remote working had delivered benefits, but that the market needed to rediscover the things that made it unique.
Discussing what she believes has been the main impact of Covid on the London market, Williams said the necessary shift to the use of technology had been one of the few positives.
“We have seen a move to greater efficiency in the market,” she explained. “2020 saw the alt, control delete keys on the world and the market faced real challenges.
“The move to greater use of technology has progressed significantly. Would we have got those moves as fast without the pandemic, probably not, but now we have to maintain that momentum.”
She added: “Technology has helped the market through this. I have to ask what would have happened had the pandemic happened 10 or 20 years beforehand.”
Hiscox chief underwriting officer Paul Lawrence said the London market has surprised him with the way in which it has been able to shift to remote working.
“I was surprised how well the London market coped with the speed of the move to remote working,” he added. “Had we not already had the [electronic placement] mandate prior to the need to work remotely, it would have been more of a struggle.
“The market has always been face-to-face and the problem we had [during lockdown] was with any risk which needed more than simply the broker and the underwriter on the call. It meant that another meeting had to be arranged, where often when we were face-to-face, we could call in those other parties on the fly.
“For the London market, the last 18 months have been functional. I do not think that the market has been affected financially, but it has been socially.
“A big part of the way the London market operates is social and we need to get that back.”
He added that it was not only the inability to meet brokers which had impacted underwriters and their relationships.
“We have many clients who will come to London to meet with the underwriters and while we have been able to speak with those clients via video conferencing, it is still not the same,” Lawrence explained.
He said that for brokers, one of the big benefits of remote working, however, has been greater access to underwriters.
“Throughout the move to working from home, people have been more accessible,” he said. “Brokers have been able to know exactly where the underwriter will be on any given day - the same place as they were yesterday.”
‘Unique’ hard market
Looking to the future post-pandemic, Lawrence said he believed the market would see a change in the way the capacity was used.
“I think we will see a reduction [in] the number of underwriters that will take lead positions on risks,” he explained. “In the future, we will see more capacity happy to play a following role and offer support to those who choose to lead.”
On pricing, Lawrence said premiums were still rising and he felt there were no indications that this would change in the coming year.
“Last year we saw a significant correction in our US casualty book, which includes [directors’ and officers’ insurance], cyber and general liability,” he said.
“In 2020, our aggregated rate increases were 71% and this year they were 25%. Any new capacity is not rushing to write US casualty business.”
Lawrence said that the current hardening market was unique in his career too.
“For the first time in my 30 years in the insurance industry this has been a market hardening that has been led by the insurance market and not driven by the reinsurers.”
Meanwhile, cyber insurance remains a major issue for the market as capacity is not keeping pace with the rapid increase in demand - Lawrence said he has seen a further spike in the costs of cyber cover in the wake of recent major events.
“In terms of cyber cover, at Hiscox, we have seen an acceleration of rates,” he explained. “In 2020, we saw rates at plus 10% - in the first quarter of this year it was plus 25% and at current renewals we are seeing plus 100%, as market capacity plateaus.
“The rise is not caused by a withdrawal of capacity, rather that companies have more cyber risks and as such are looking for higher limits.
“It is different to the [business interruption] debate over what is or isn’t covered. If Amazon cloud services goes down, it will trigger every cyber policy. There is no argument around coverage in cyber, it is covered.
“As such, boards are examining their cyber strategies. Nobody wants to be caught out again like they were with Covid.”