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Hard Market - What does it mean for you?

Insurance Market Update

The insurance market has undergone a significant transformation since 2018 with increasingly difficult market conditions experienced across most classes of insurance and no signs of the situation easing in the short term.

But what is the cause of the ‘hard market’ and what can be done to minimise the impact?

What has caused  the hard market?

The traditional insurance cycle of ‘hard’ and ‘soft’ market conditions has changed in recent years and since the early 2000’s we have experienced an unusually long ‘soft’ period of trading – an abundance of insurer capacity resulting in increased competition, broad insurer appetite for risk and lower premiums.    However, recently a combination of various factors has impacted insurers including:

  • Severe losses caused by UK based storms and flooding
  • Increased scrutiny of historical construction materials (composite panels, Grenfell etc)

Changes to the Ogden Discount Rate – changes to the way severe injury compensation claims are calculated – as well as general claims inflation

  • the increased burden of regulation by the Financial Conduct Authority
  • lower investment income returns putting more pressure on underwriting profitability
  • increased reinsurance costs impacted by a number of global factors such as catastrophe losses and political uncertainty
  • The implementation of Solvency II, legislation which requires insurers to hold larger capital reserves, consequently making it more difficult for new entrants to the market
  • The impact of Covid 19 on the industry – the widely accepted estimate of the negative impact of the pandemic was around £4bn

What should I expect from a hard market?

The hard market will include some of or a combination of:

  • Significant increases in premiums – this could range from double digit increases to multiples of premium
  • Increased policy excesses and reductions in limits being offered
  • Reduced number of insurers willing to quote as some withdraw from certain sectors
  • Less flexibility and more restricted risk acceptance criteria from insurers
  • A reduction in the level of service provided by insurers as a result of referrals and quote activity.

What can you do to assist?

  • For Corporate clients begin the renewal process early, at least three months before renewal date – decide on your strategy with your broker. It is definitely not in your interest to get multiple insurers / brokers involved – a targeted approach with your current broker and potentially one other is the best approach.
  • Provide as much risk information as possible, for example premises construction and security details, Health & Safety policies and procedures and highlight other risk management features
  • Budget realistically


What can TL Dallas do to help?

TL Dallas expect these difficult market conditions to continue for the foreseeable future.  However, we continue to be pro-active, seeking the most favourable terms for clients based on extensive market knowledge and strong insurer relationships, meaning we continue to be best placed to help clients weather a hardened market for the short, medium and long term.

Feel free to contact one of our account executives for an exploratory conversation regarding your requirements.