News
Hard market to continue with disequilibrium in demand and supply: Swiss Re Institute
A disequilibrium in demand and supply of non-life insurance is expected to persist, and with it a continuation of current hard market conditions, especially in property catastrophe lines, according to Swiss Re Institute.
Driven by increased natural catastrophe activity as well as inflation, demand for insurance protection has risen since 2017, which is resulting in higher replacement values, analysts explain.
At the same time, a higher growth in industry capital is needed to narrow protection gaps world wide. For example, in the US, property and casualty insurance industry capital has grown by 5% annually on average for the past 10 years. During the same time, the need for nat cat protection has grown at about 7% per year on average.
Globally, the value of unprotected risk exposure has risen steadily in the past five years. Swiss Re Institute estimates the global protection gaps for natural catastrophes, crop, mortality and health insurance at $1.8 trillion in premium equivalent terms for 2022.
“Both primary insurance and reinsurance sectors contribute to closing the protection gaps. In an environment where heightened risk awareness prevails, the role of reinsurance in providing peak capacity for the primary insurance sector is becoming increasingly relevant. This is also reflected in the fact that property re/insurance – the line covering the largest part of natural catastrophes – has seen premium volume growth of 4.3% in primary insurance and 5.9% in reinsurance over the last decade,” analysts stated.
With increased demand along with elevated risks and limited capacity, it is key for primary non-life insurers to use capital more efficiently, the Institute highlights.
What Nationwide's E&S commercial auto exit means for the space
Nationwide’s E&S commercial auto exit has set tongues wagging, but while industry sources told Insurance Business that it will have had an impact and brokers may feel some short-term pain, they were confident that it will not reshape the space.
“As a whole, the Nationwide exit, while it is impactful, it's a very large marketplace and the company was already starting to exit certain classes of commercial auto business and territories, like California,” said Jennifer Nuest, senior vice president, transportation practice leader at Amwins.
“Typically, what's going to happen with an exit like this is a bunch of different players that are going to pick up the business, depending on what segment of commercial auto we're talking about.”
Hurricane Lee Charting a New Course in Weather, Could Signal More Monster Storms
Hurricane Lee is rewriting old rules of meteorology, leaving experts astonished at how rapidly it grew into a goliath Category 5 hurricane.
Lee which just as quickly dropped to a still-dangerous Category 3 and held that strength Saturday could still be a harbinger as ocean temperatures climb, spawning fast-growing major hurricanes that could threaten communities farther north and inland, experts say.
“Hurricanes are getting stronger at higher latitudes,” said Marshall Shepherd, director of the University of Georgia’s atmospheric sciences program and a past president of the American Meteorological Society. “If that trend continues, that brings into play places like Washington, D.C., New York and Boston.”
Hyperintensification
As the oceans warm, they act as jet fuel for hurricanes.
“That extra heat comes back to manifest itself at some point, and one of the ways it does is through stronger hurricanes,” Shepherd said.
During the overnight hours Thursday, Lee shattered the standard for what meteorologists call rapid intensification __ when a hurricane’s sustained winds increase by 35 mph (56 kph) in 24 hours.
“This one increased by 80 mph (129 kph),” Shepherd said. “I can’t emphasize this enough. We used to have this metric of 35 mph, and here’s a storm that did twice that amount, and we’re seeing that happen more frequently,” said Shepherd, who describes what happened with Lee as hyperintensification.
With super-warm ocean temperatures and low wind shear, “all the stars were aligned for it to intensify rapidly,” said Kerry Emanuel, professor emeritus of atmospheric science at the Massachusetts Institute of Technology.
Majority of carriers plan to increase staff in coming 12 months
Despite recent layoffs at major P&C carriers, most insurance companies are planning to increase staff sizes in the coming 12 months, according to the latest Insurance Labor Market Study from The Jacobson Group and Aon plc. Just 10% of insurance companies expect to cut staff in the coming 12 months.
Across insurance segments, including P&C, life and health, 63% of carriers said they plan to increase hiring in the coming 12 months. During that period, property & casualty insurers are expected to make the most hiring moves, with 65% of companies in the space planning to boost staff size. In comparison, 56% of life and health carriers said the same.
Claims and underwriting roles remain the most in-demand positions, the survey found.
“While the labor market appears to be settling compared to last year, recruiting remains difficult and the majority of insurers aspire to add staff,” Gregory P. Jacobson, co-chief executive officer of The Jacobson Group, said in a release. “Carriers must be doing everything they can to position themselves as an employer of choice from a compensation, benefits and flexibility standpoint.”
Nearly half of the companies with hiring plans said they are growing their headcount to meet anticipated increases in business, while around one-third said they are increasing staff to expand business or enter new markets. Around 30% said hiring would be conducted to fill understaffed positions and departments.
Among the 10% of companies planning to reduce staff, 9% said it was because of automation, the most commonly cited reason for cuts. Reorganization, overstaffing and a decrease in business volume were the other commonly cited reasons for staff reductions.
Hiring remains challenging
Looking back over the past year, the total insurance industry saw its headcount increase 1.1%, beating out estimates of 0.94% growth, according to Jacobson.
However, P&C carriers’ headcount increase of 1.25% came in below the expected 2.14% rate. P&C insurers might have come up short on projections due to difficulty filling open positions, as Jacobson reported insurers rank all positions as at least moderately difficult to fill.
Insurance industry faces record annual nat cat losses of $133 billion: Verisk
The global insurance industry is grappling with an unprecedented challenge as the annual average loss from natural catastrophes reaches a staggering $133 billion, according to the latest findings from Verisk’s extreme event solutions models.
These figures, unveiled in the 2023 Global Modeled Catastrophe Losses Report, highlight a concerning trend of escalating losses over the past decade.
Bill Churney, President of Verisk’s extreme event solutions, attributes this alarming surge in catastrophe losses to several key factors.
The primary drivers include the growth in exposure values, fueled by ongoing construction in high-hazard areas, and rising replacement costs due to inflation.
While climate change is often cited as a factor, Churney emphasizes that year-over-year increases in exposure and replacement values exert a more immediate impact.
InsurTech/M&A/Finance💰/Collaboration
KKR ups stake in USI with $1B deal
USI Insurance Services LLC on Monday said that existing shareholder private-equity firm Kohlberg Kravis Roberts & Co. LP is making a new equity investment of more than $1 billion in USI and will become its largest shareholder.
Terms of the transaction, expected to be completed by the end of 2023, were not disclosed.
New York-based KKR and Montreal-based Canadian pension fund Caisse de dépôt et placement du Québec bought USI in March 2017 for $4.3 billion in partnership with USI’s management and employees.
Under the new deal, KKR and USI will purchase shares of USI held by CDPQ and certain other investors, with more than 50% of shares held by CDPQ to be purchased in the transaction, the closing of which will make KKR USI’s largest single shareholder, the broker said in a statement.
Other KKR insurance sector investments include a majority stake in Carlsbad, California-based program administrator Integrated Specialty Coverages LLC.
Are we at an insurtech inflection point?
As venture capitalists associated with reinsurers come to the fore, Gallagher Re’s Andrew Johnston explores the significant shift in global insurtech funding and investment.
Between 2012 and 2021, investors poured an impressive $42bn into insurtech firms.
A substantial portion of these investments came in the dynamic years of 2019 and 2020, when the insurtech theme gained remarkable momentum. We saw a surge in interest from generalist tech venture capitalists and private equity firms, which flooded into the insurtech investment landscape. However, many of these investors were notably lacking a specific concentration in insurtech or a deep understanding of our industry.
At the peak of this insurtech investment craze, inflated valuations became commonplace. However, as we moved into a higher interest rate environment in 2022, the consequences of these lofty valuations became evident, causing significant and long-lasting damage.
Our Q2 2023 insurtech report estimates that up to a third of the insurtech ventures present during that exuberant period have since ceased to operate as viable businesses. These findings underscore the importance of prudent investment strategies and industry knowledge to ensure sustainable growth – as well as resilience in the ever-evolving insurtech landscape.
Has the $42bn been worth it then?
For insurtechs that have struggled, or the investors that backed them, probably not. What it has done, however, is dramatically spur the understanding and adoption of digital innovation among the insurance industry’s established players.
Dr Andrew Johnston is global head of insurtech at Gallagher Re
The above is an extract from Gallagher Re’s Q2 2023 Global InsurTech Report, which highlights a significant shift in global insurtech funding and investment, published in August 2023.
**For the full report, please visit
European InsurTech hits tough spot
European InsurTech on track to report lowest investment since 2019
See Key European InsurTech investment stats in H1 2023 graphic attached.
European InsurTech deal activity is on track to reach 154 transactions in 2023, a 28% reduction from last year’s levels
European InsurTech investment in H1 2023 reached $595m, a 46% drop from H1 2022
The UK remains the most active InsurTech country in Europe with 26 deals in H1 2023
European InsurTech has seen a correction in 2023 with both deal activity and investment on track to drop to their lowest levels in the past five years. Based on the investment pace in the first six months, InsurTech deal activity in Europe is projected to hit 154 funding rounds in 2023, a 28% decrease compared to the levels seen in 2022. In the first half of 2023, European InsurTech investment totalled at $595m, reflecting a 46% decline compared to the same period in 2022.
Quantexa, which provide data analytics for anti-money laundering, had the largest European InsurTech deal in H1 2023, raising $129m in their latest Series E funding round, led by GIC. In what has been a difficult period for many tech companies, Quantexa continues to post impressive growth, having grown their ARR over 100% since closing their Series D round. In the same time period, Quantexa has seen robust growth in all regions, including a breakout performance in North America, with an increase in ARR of over 180%. This new capital will ensure that Quantexa continues to grow its global presence and invest in its world-class engineering talent. Quantexa also plans to use the funding to boost technology innovation efforts and strengthen its Decision Intelligence Platform capabilities in low-code data fusion, graph analytics, machine learning (ML), natural language processing (NLP) and artificial intelligence (AI). Additionally, Quantexa will increase focus on accelerating joint go-to-market efforts with its flagship partners which include Google, Moody’s, Accenture, KPMG, Deloitte, and EY.
The UK continued to be the most active InsurTech country in Europe with 26 new capital raises in H1 2023, a 34% share of all transactions. France and Germany were the joint second most active InsurTech countries with nine deals each a 11.6% share of deals.
The Retained EU Law (Revocation and Reform) Act 2023 makes significant changes to the framework of REUL. The Treasury will repeal the firm-facing requirements in retained EU law (REUL), and we will replace those provisions, where appropriate, with our rules. There is a significant amount of REUL, and the repeal and replacement work will have an impact on our Handbook. This includes the Insurance Distribution Directive (IDD). With the next steps being an FCA Consultation Paper in September 2023. The IDD was designed to establish standards and transparency measures for insurance distributors, ensuring fair treatment and clear information for consumers when purchasing insurance. It covered aspects like business conduct standards and transparency requirements, such as providing comprehensive information to consumers. Efforts were underway to replace certain regulations related to the IDD, in collaboration with the Treasury, for regulatory consistency.
CLARA Analytics | Improving Claims Outcomes With AI
CLARA Analytics (“CLARA”), a leading provider of artificial intelligence (AI) technology for insurance claims optimization, today announced its $24 million Series C funding, bringing its total funding to $60 million. This round was led by new investor Spring Lake Equity Partners, with participation from existing investors including Aspen Capital Group, Oak HC/FT and QBE Ventures.
“Insurers are facing increased pressure to manage losses and expenses, and they have awakened to the value that AI can generate in claims management. We have witnessed this first-hand, having experienced significant growth in our customer base and more than doubling our annual recurring revenue. We have continued to increase our penetration of the workers’ comp industry while also expanding into auto liability and general liability,” said CLARA Analytics CEO Heather H. Wilson. “We’re excited to have Spring Lake Equity Partners as our new lead investor. We see this funding as a tremendous vote of confidence, especially in light of the very tight funding environment.”
The new round further establishes CLARA’s leading position as the AI platform provider of choice for insurance carriers and self-insured organizations. CLARA intends to use the investment to further enhance its platform’s leading AI capabilities, including generative AI, predictive modeling, and natural language processing capabilities.
“The insurance industry is facing a perfect storm of forces that have been driving losses higher in recent years,” said Jeff Williams, Partner at Spring Lake Equity Partners. “CLARA’s AI platform is the missing ingredient that empowers several of the world’s most innovative carriers and self-insured companies to rein in spiraling loss costs and deliver tremendous value to policyholders and shareholders. CLARA is poised to dominate this space because they are laser-focused on claims optimization and delivering a substantial return on investment for their customers.”
Commentary/Opinion
Society needs to accept the price of risk is increasing: Hannover Re CEO
In the current market environment, there are clearly pressure points in the risk transfer value chain, but the reality is that the price of risk is increasing and this is something that society needs to accept, according to Jean-Jacques Henchoz, Chief Executive Officer (CEO) of Hannover Re.
Speaking this morning at the annual Hannover Re Monte Carlo press breakfast, the CEO of the global reinsurer commented on pressure points between insurers, reinsurers, policyholders and other stakeholders.
Henchoz explained that what is different this year from last, is that the logic of the market has shifted considerably.
“The supply demand imbalance is going on the other side. We went through a number of years of so called soft markets, meaning that there was enough capacity in the system to sustain the risk appetites. This has changed dramatically last year, as you know, and this creates these pressure points,” said Henchoz.
Nevertheless, he continued, “the reality of today’s world is that the price of risk, and I repeat myself, the price of risk is increasing, and the issue is society generally needs to come to terms with that.”
Opinion: Climate Change and the Insurance Industry
If we choose to ignore UN studies, formidably persuasive analyses, and the obvious rise in sea levels and temperatures–and what we see with our own eyes and feel, and breathe–how else might we be persuaded to accept the reality of the challenges facing our planet, and, not to put too fine a point on it, the threat to human survival?
Look no further than the insurance industry to get the picture. The industry is assessing risk on what it insures and it doesn’t like what it has experienced or what it sees coming.
As the planet warms, no place, or time, seems safe from climate-induced disaster. We continue to suffer from smothering heat, deadly wildfires, blankets of harmful smoke, floods caused by tropical storms, and weeks of stifling heat not only in Arizona and Texas but in the Midwest as well.
It’s not even realistic, for example, to expect a reprieve as our hellish summer comes to an end: The Atlantic hurricane season is projected to have “above-normal level of activity” according to an updated forecast from the National Oceanic and Atmospheric Administration.
There is but one certainty: Dangerous weather events will become common as the planet continues to warm.
The impacts will be consequential. Shallow water in the Panama Canal, for example, as a result of persistent drought, is slowing traffic as ships have to carry less cargo to lessen their weight, and the Mississippi River, a major route for shipping corn and wheat exports in the coming months, is drying out. Direct hits on the economy are coming.
The insurance picture
U.S. insurers have disbursed $295.8 billion in natural disaster claims over the past three years–a record for a three-year period, according to the American Property Casualty Insurance Association. Indeed, the frequency of costly disasters brought on by climate change has already turned profits into losses. In 2022, property and casualty insurers recorded a $26.5 billion net underwriting loss. Insurers have paid out more than $40 billion in damage claims, this year, on a pace for a record in yearly losses.
It’s increasingly expensive and difficult to get homeowners insurance as losses increase from climate-driven disasters such as wildfires and hurricanes.
Linda Stamato is a policy fellow at the New Jersey State Policy Lab and co-director of the Center for Negotiation and Conflict Resolution at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University
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