Insurance news

The global construction insurance market is seeing a notable increase in capacity levels, approaching those seen in 2019 during the last soft market cycle, according to a report from WTW.

This upward trend in capacity is forecasted to continue through the second half of 2024 and into 2025, driven by insurers’ focus on maximising local capacity and pressure from new market entrants seeking to gain a foothold.

Key drivers of the market include growth in infrastructure projects, pricing stability, and opportunities emerging from coverage gaps.

Global construction insurance sector growth

The report highlighted sector growth in construction, particularly in energy, utilities, and infrastructure projects, which are expected to increase by 7.8% and 5.1%, respectively, in 2024.

A significant rise in manufacturing investments is also anticipated, especially in semiconductor plants, gigafactories, and data centres across North America, Latin America, and Europe.

Global construction insurance pricing

Despite inflation and higher interest rates, pricing in most regions and lines of business is expected to remain stable due to increased competition and new market entrants.

However, in regions prone to natural disasters – such as the Gulf of Mexico, the US East Coast, and parts of Latin America and Asia – pricing and capacity are still being carefully managed due to the elevated risk.

Emerging opportunities for the global construction insurance market

The soft market is also presenting opportunities for insurers to address coverage gaps, such as complex construction risks and professional liability coverage in large infrastructure projects, particularly in Europe, Asia, Australia, and New Zealand.

In the US, new opportunities may arise in auto liability and lead umbrella casualty lines.

Impacts of politics on global construction insurance market

Political uncertainty, particularly elections, has led to delays in major investment decisions in the construction sector.

However, WTW anticipates that large infrastructure projects, especially in the UK and European Union, will gain momentum heading into 2025.

Tech innovation in global construction insurance market

Technological innovation is another area driving growth.

The construction industry is increasingly investing in technology solutions, such as artificial intelligence (AI), robotics, and drones, to enhance productivity and address labour shortages.

Global construction insurance market outlook

Iain Drennan, head of construction for Australia and New Zealand at WTW, said all indicators point to a positive market outlook.

“The resilience of the construction insurance market continues to impress in the face of persistent economic headwinds, and contractors are finding innovative ways to manage risk,” he said.

Michael Bruch, global head of risk advisory services at Allianz Commercial, said the use of mass timber in construction has been expanding, particularly in high-rise buildings.

The material offers environmental benefits by reducing the industry’s carbon footprint, but it also introduces new risks, including fire hazards and vulnerabilities to natural disasters.

Bruch highlighted the growing use of mass timber in Europe, Asia, and North America, emphasising the importance of fire-resistant design and careful risk management when incorporating this material into large-scale projects.

Aon has released its “Ultimate Guide to the Reinsurance Renewal – September 2024” report, highlighting the contrast between the strong financial results of the reinsurance industry and the challenges faced by insurers amid rising losses and more complex risks.

The report emphasizes the industry’s potential for growth, noting that the global insurance premium to gross domestic product (GDP) ratio has remained around 1.8% since 2010. This is despite an increase in exposures and unmet client demand, signaling potential areas for expansion.

In the first half of 2024, natural catastrophe re/insurance payouts totaled $58 billion, significantly higher than the decadal average of $47 billion. Despite these payouts, reinsurers recorded an average return on equity (ROE) of 17.6% during the same period.

Aon’s analysis of 100 global re/insurers found that some of the largest players reported ROEs exceeding 25%, outperforming many primary insurers and surpassing their own cost of capital. This strong financial performance could drive further growth.

However, the report points to uneven profitability across the insurance value chain. Higher retentions in insurers’ catastrophe programs have limited capacity for frequency covers, leading to an unequal distribution of underwriting profits.

Global reinsurer capital reached a record $695 billion as of June 30, 2024, an increase of $25 billion from the end of 2023. This rise was mainly driven by retained earnings, increased inflows into the catastrophe bond market, and recovering asset values.

A survey of re/insurers showed average annualized investment yields of 3.8% in the first half of 2024, up from 3.1% in the previous year.

Reinsurance pricing has begun to decrease gradually in 2024, partly due to a rise in alternative capital, which reached $110 billion. Reinsurers have also granted rate reductions for top-performing risks. Aon predicts that competition in pricing will increase in 2025, giving insurers more flexibility in terms of capacity and coverage.

Rupert Moore (pictured above), UK CEO of Reinsurance Solutions for Aon, commented that the reinsurance market must take a more proactive role in managing frequency losses and earnings volatility. If reinsurers continue to avoid risk, insurers may follow suit, shrinking the industry’s relevance.

Moore stated that Aon’s role is to bring clarity and confidence to risk management, helping to shape better decisions and highlight opportunities for profitable growth.

The report also highlights the volatility experienced by re/insurers in 2024, driven by diverse events such as earthquakes and airline losses in Japan, the Baltimore bridge collapse in the US, severe flooding in Dubai, and a global computer outage at CrowdStrike.

According to Moore, these events underline recurring themes for the industry, including the increasing interconnectivity of risks, loss volatility, and the growing gap between insured and economic losses.

The industry must either adapt to the opportunities presented by shifting risks or risk seeing a greater portion of that risk absorbed by the public sector and capital markets.

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Digital platform CatX has announced the appointment of Jon Wood as the head of origination.

CatX co-founder and CTO Lucas Schneider said that Wood’s more than two decades of experience will be helpful to the firm’s operations.

“With over 20 years in the industry, Jon will help us to secure attractive opportunities for our funds and accelerate the flow of alternative capital into insurance,” said Schneider.

Benedict Altier, co-founder and CEO of CatX said Wood’s appointment coincides with the firm facing interest from new capital sources.

“Jon’s leadership will be key in driving our strategy and helping us to better connect risk with new capital,” said Altier.

Who is Jon Wood?

Wood has more than 20 years of experience within the industry, with his most recent role being in Aon’s retrocession leadership team where he had helped in shaping and executing the company’s global strategy as well as drive high-value transactions throughout the international reinsurance market.

Before Aon, Wood also had senior positions in various firms like Willis Re and Guy Carpenter. He has experience when it comes to client executive and production roles where he has provided his expertise in traditional and alternative risk transfer solutions.

In his new role, Wood will be working with the reinsurance, retrocession, and global corporate broking teams of the firm in order to best leverage the capital that is available through the platform for their clients.

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Small- and medium-sized businesses (SMBs) represented about 45% of the cyber market exposure, a study by Guy Carpenter found.

In its latest cyber research report entitled “Small Businesses and the New Frontier of Cyber Catastrophe Modeling,” which was from its Cyber Center of Excellence, it was found that the number of SMBs recorded for cyber market exposure was a notable increase of 45% over the last five years.

The study said that the increased share of SMBs in the cyber insurance market meant that the accurate quantification of their aggregation potential was important to the capacity deployment as well as risk management.

In contrast to the overall SMB segment, the report found that those with cyber insurance coverage had strong security postures. This meant that incorporating the security posture gap into cyber modeling analysis is vital to accurately quantify the appropriate aggregation risk for the portfolio.

However, because there is a notable lack in credible data, cyber catastrophe (CAT) models struggled in reflecting the disparities of cybersecurity postures when it comes to SMBs.

As the adjustment of CAT model outputs in order to reflect the impacts of fundamental security controls leads to a more accurate and precise differentiation of SMB risk, model adjustment serves as an important step when it comes to establishing a view of modeled loss potential, which can support the growth in a market segment that is set for a continued expansion.

The “Small Businesses and the New Frontier of Cyber Catastrophe Modeling” report was developed by cyber insurance provider At-Bay and discussed the impact of cyber on SMBs, suggesting actionable solutions when it comes to modeling, data, and impact mitigation.

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Global property and casualty reinsurers were found to have strong earnings that had solid premium and investment income growth, a report by Morningstar DBRS found.

According to the report, the growth had largely benefitted from the continuous favourable pricing and interest rate environment. The report said that all of the selected global top P&C reinsurance firms saw significant net income growth during H1 2024 compared to what was recorded in the previous year except for SCOR S.E. and PartnerRe Ltd.

From the $10.3 billion recorded in H1 2023, the total aggregated net income for the same period this year has seen a 25% year-over-year increase, to a total of $12.9 billion. Notably, H1 2024 was said to be one of the costliest half years for natural catastrophe losses within the last 10 years. Despite this finding, there were a select few among reinsurers that maintained their high profitability with disciplined underwriting.

Selected Bermuda-domiciled reinsurers continued to have strong contributions to their aggregated net income even if there was a slight slowdown in the growth of the performances of underwriting and investments. Even though SCOR saw a loss during H1 2024 because of the assumption review made by its Life & Health reinsurance business, its P&C reinsurance business still reported growth.

Some reinsurers said that they experienced low natural catastrophe losses in the first quarter of 2024. However, the frequent mid-sized natural disasters that happened in Q2 2024 led to a higher but still low average combined ratio for the group which was relative to H1 2023.  It was also believed that natural catastrophe losses will increase in H2 2024.

Meanwhile, with the current high-interest-rate environment, global reinsurers continued to receive benefits since they typically reinvested their maturing securities into higher-yielding securities while maintaining a similar risk profile.

The report’s outlook for the global P&C reinsurance market continues to be positive even with the high natural catastrophe losses as well as the likely lower interest rates all around the world.

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AM Best has affirmed the financial strength rating and the long-term issuer credit ratings of Axis Capital Holdings Ltd’s operating subsidiaries, which was A (Excellent) and “a+” (Excellent) respectively.

The credit rating agency also affirmed its long-term ICR, which was “bbb+” (Good) as well as the indicative long-term issue credit ratings of the parent company. These ratings were affirmed for Axis Specialty Ltd, Axis Re SE, Axis Reinsurance Company, Axis Specialty Europe SE, Axis Surplus Insurance Company, and Axis Insurance Company.

“The group’s balance sheet strength assessment is supported by financial flexibility at the holding company level and within the operating subsidiaries, while also reflecting capital management strategies that have included consistent common and preferred dividends, as well as share repurchases,” the ratings agency stated.

It further said that in late 2023, the firm had strengthened the reserves on its casualty book following an evaluation and review of claims for accident years of 2017 to 2022, which were impacted by the higher social and economic inflation that was not anticipated.

“However, prior to 2023, Axis had reported favourable reserve development for about nine of the past ten years, testament to the company’s reserving controls efficiency. Financial leverage is elevated when compared with its peers but remains largely in line with the company’s expectations,” said AM Best.

AM Best rated the firm’s operating performance as adequate because its underwriting results over the last five years were volatile. However, it also said that the corrective measures that were implemented in the last two years in order to mitigate volatility like leaving the property-catastrophe reinsurance business led to more stable earnings.

“These changes have favourably impacted profitably measures with the group’s loss and combined ratios improving significantly,” said AM Best.

Axis’ business profile was also assessed as favourable because of how the group was consistently part of the credit rating agency’s Global Reinsurance 50 largest reinsurance enterprises as well as its excess and surplus ranking.

“The group’s ERM is sophisticated and embedded throughout the organisation. AM Best believes that Axis’ risk management is appropriate given its complex risk profile,” said the credit rating agency.

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Gallagher has announced the appointment of Bruce Dettling (pictured) as global head of mining and heavy industry, a newly established role aimed at strengthening the company’s global specialist practice in this sector.

Dettling will officially join Gallagher in November and will report to Malcolm Payton, CEO of property and casualty insurance solutions and head of global fac at Gallagher Specialty.

Dettling brings over 20 years of senior-level broking experience to Gallagher, having most recently served as head of mining at Aon in London. His career includes positions at Lloyd & Partners and Marsh, where he specialized in mining and associated industries, as well as property and casualty broking.

Gallagher highlighted that its mining and heavy industry sector specialists provide support to companies of all sizes with their operations, projects, and investments worldwide.

The mining sector faces a variety of risks, including natural catastrophes, machinery breakdowns, environmental and transportation hazards, and financial risks. Gallagher’s client base spans 25 different commodities, and the team offers extensive industry-specific expertise.

Payton stated that Dettling will be an excellent leader for the global mining team. He also noted that Dettling’s extensive experience and strong client relationships align well with Gallagher’s approach and will further reinforce the company’s expertise in the mining and heavy industry sectors.

Gallagher’s last high-profile appointment came in July, when the global financial services giant named Richard Harries to its board of directors, bringing in a seasoned professional with over 35 years of insurance sector experience.

Harries’ extensive career spans various senior roles across the UK and other heavily regulated markets. Notably, he previously served as chief executive, chief underwriting officer, and energy underwriter at Atrium Underwriters Limited. His tenure at Willis Faber & Dumas saw Harries in significant positions within the energy sector.

In other developments, Gallagher also recently published its financial results for the second quarter of 2024 – a period described by chair and chief executive J. Patrick Gallagher, Jr. as excellent.

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About six in 10 firms are reporting a decline in employee engagement in using hybrid work models.

A survey by Zoom found that 84% of organizations in the Asia Pacific have either a hybrid or remote working model.

Encouragingly, 83% of employees said that they are most productive in hybrid settings. And 87% of leaders in APAC considered increasing productivity to be the biggest consideration when determining the best working style for their company.

However, six in 10 leaders report a decline in employee engagement due to this approach, found the survey of more than 600 IT and C-suite leaders and nearly 1,900 knowledge workers across the globe, including 604 in APAC.

“Workplace flexibility is not only becoming increasingly commonplace in the APAC region, but more diverse in itself — ranging from flextime to location, role, and even rotation-based models,” noted Ricky Kapur, head of Asia Pacific, Zoom.

“Leaders today are faced with a new challenge of finding the best-fit hybrid model while keeping up with the evolving expectations of a multi-generational workforce and the impact of rapidly advancing technologies like AI.”

Generative AI ‘makes it easier to do my job’

A majority of employees (81%) agree that the tools and technology their organisation currently uses for remote work needs improving, highest among the other regions surveyed, found Zoom.

And organisations are already seeing the benefits of incorporating AI: 85% of APAC leaders believe that generative AI has made their workforce more productive, while 69% of employees in the region strongly or slightly agree that “generative AI makes it easier to do my job.”

However, significant barriers to generative AI adoption for employees in APAC still remain:

• 70% believe that generative AI has a high learning curve.
• 63% are not yet comfortable with generative AI.
• 55% are concerned that generative AI will negatively impact their job/position.

“While our study shows that APAC leaders generally recognise the productivity benefits that adopting AI at work can bring to their teams, many are not utilising AI to their full potential. As organisations seek to reduce friction in the transition to hybrid ways of working, AI is a critical tool at their disposal to help employees collaborate better and feel more connected to each other,” said Kapur.

“Beyond direct productivity benefits, leaders should look toward exploring more AI use cases to engage, inform, and connect employees. This will be key to building and maintaining company culture amidst changing workplace dynamics,” he said further.

Commercial insurers and reinsurers are navigating a rapidly evolving landscape shaped by changing customer expectations, technological disruption, and competition from new and non-traditional players.

According to insights from consultancy EY, the industry is experiencing a shift from its traditional linear value chain to a dynamic value exchange, which is creating new opportunities for innovation and growth.

EY’s latest NextWave report outlines how inefficient processes and misaligned incentives of the past are being replaced by direct connections, real-time data feeds, and new services such as risk prevention.

The report suggests that the foundation many insurers established by automating core operations in the aftermath of the pandemic can now be built upon with analytics-driven capabilities essential for future growth.

A key recommendation from EY is for re/insurers to maintain a rigorous focus on client needs and a clear purpose to drive product and service innovation. Enhanced digital capabilities, increased organizational agility, and new talent across the enterprise are identified as critical elements for achieving operational excellence and stronger financial results.

EY identifies four focal points that are essential for leadership in the commercial and reinsurance markets:

• Innovation – EY emphasizes that innovation should be guided by a clear purpose to deliver client value. The insurance industry’s role in protecting against significant threats such as cybercrime, climate risk, and geopolitical conflicts is more relevant than ever.

  As insurers develop tailored policies based on deep client insights, these policies will gain greater value when aligned with a clear purpose that generates social value. EY suggests that new and enhanced services will eventually replace existing policy types within holistic value propositions that include proactive risk prevention and advisory services.
   

• Connectivity – According to EY, building on baseline digitization is crucial for optimizing the entire business. To deliver insight-driven services and tailored products at scale, insurers need sophisticated front-end solutions, highly automated back-office operations, and advanced data management and analytics capabilities.

  EY advises insurers to focus on transformation investments that provide value across the business, rather than merely implementing point solutions. The report highlights that real-time connectivity enables a dynamic value exchange, and common data standards within the industry will facilitate quick, transparent data sharing.
   

• Community – EY notes that collaboration and co-creation are key to driving value, as few insurers can address all customer needs alone, especially in the face of large-scale threats like climate change and cyber risks. By forming or joining ecosystems, insurers can leverage extensive connectivity and focus on roles that align with their core strengths.

  EY suggests that insurers should design ecosystems around distinct customer needs, deploy advanced IT architectures for secure data sharing, and utilize outsourcing to scale operations in line with demand.
   

• Talent – Despite technological advancements, EY underscores the importance of putting humans at the center of the insurance enterprise. Creating a culture that values collaboration and creativity is essential for attracting the right talent.

  EY recommends that insurers seek diversity at executive levels, embrace leadership that links work to a broader purpose, and build compelling employee value propositions to develop a more diverse and effective workforce.

Overall, EY’s insights indicate that success in the commercial and reinsurance markets will depend on insurers’ ability to innovate with purpose, enhance connectivity, collaborate effectively, and prioritize talent development in an increasingly complex and competitive environment.

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