Market update: Growth in capacity in challenging time

Specie, Fine Art, Cash in Transit and Jewellery

The COVID-19 pandemic’s influence on the way we work in the insurance market is almost approaching its one year anniversary.

In most instances, this has been a challenging time for clients, brokers and insurers alike. The market has had to adapt very quickly to a new way of working, which for the past 9 months has been almost exclusively remotely. Makeshift home offices have been assembled and many online meetings have been interrupted by children walking into shot, as they are stuck at home rather than being at school!

We have seen insurers make changes to their underwriting strategy and come under intense scrutiny around coverage issues impacted by the virus – in particular for Business Interruption insurance.

The outlook and forecast for many was poor results and the onset of a hard market.

We can be forgiven for thinking that it is all doom and gloom in the insurance market, but the past year has actually thrown up some interesting observations, particularly within the Specie Market.

Whilst we are not immune to the negative impacts of Coronavirus and the losses it has created, it cannot be denied that the impact has not been as devastating as some predicted.

Many viewed 2020 as the start of a Hard Market in Specie, but in truth, this hasn’t materialised. Sure, in some areas rates are stiffening (or perhaps not falling like previous years), but it is certainly not moved to a hard market just yet.

In fact, many of the Specie Market’s clients in the Bullion, Jewellery and Precious Metals industries had a fantastic 2020 due to people flocking to invest in the traditional safe haven of Gold and other precious metals. One of the biggest challenges these businesses faced was supplying their customers quickly enough, as supply chains were disrupted from the virus with less travel being permitted and planes being grounded. The price of Gold in particular reflected this increased demand and rallied throughout 2020 to its highest ever levels.

The knock on effect on the insurance market, was that many clients in this arena were seeking more coverage for increased limits and volumes, meaning more capacity was required to fulfil this need. Interestingly, we found that in the majority of cases, the capacity was there.

Despite rumours of hard markets, horrible reinsurance deals for Lloyd’s syndicates looming and shrinking of capacity, almost the opposite can be said.

Yes, there were one or two casualties within the marketplace, but they have been replaced with the entrance of new capacity. The Reinsurance renewal period was not as eventful as predicted.

We cannot deny that some market conditions have taken a hardening stance. There is certainly more scrutiny around individual risks along with Underwriter decision making and therefore more details and insight regarding each risk is needed.

We encourage clients to plan ahead in respect of their insurance arrangements, demonstrate their proactive approach to security, processes and procedures to make themselves stand out from the crowd.

As demonstrated, with a large amount of capacity still available in the Specie Market, there is still a large amount of choice and opportunities to drive competition between insurers for the right risks. Whilst there is still a large amount of choice, the market conditions will remain resistant to hardening.

It is certainly an interesting time and we are yet to see what 2021 brings, but building a strategy with your broker will result in a positive outcome. As always, having the right risk advice and strategy remains key in order to deliver the most suitable outcome for clients and their business.