White Paper

Navigating a Complex Financial Lines Market

Risks and opportunities abound in the financial lines insurance space as threats grow more complex. While rate increases in some lines have slowed, brokers and insurers are keeping a watch on claims trends as courts reopen following the pandemic.

White Paper Summary

The financial lines insurance market is growing increasingly intricate and complex to navigate due to a range of factors, including heightened cyber risk, event-driven litigation, derivative litigation, regulatory expansion, and many other factors. Rate increases over the last few years have helped address long-term price inadequacies, but many established insurers in this $40 billion to $50 billion market remain cautious.

“Insurers that previously offered $20 million to $50 million limits are now putting up $5 million,” said Tom Fitzgerald, President, Specialty and Commercial at QBE North America.

“As a result, building large towers has become much more complicated. You need many more insurers to complete a tower. Ensuring language consistency is important for all constituents. This trend, along with an increasing rate environment, has created opportunities for other markets.”

The market for directors and officers (D&O) risk provides a good example. Three years of rising rates have attracted new market entrants, principally from Bermuda, that aren’t burdened by under-reserved legacy claims. Additionally, it appears frequency trends have muted as Covid 19 has caused litigation to be deferred.

These new market entrants, mainly in the upper layers of towers, have caused rate increases to begin tapering. As courts reopen and tackle the case backlog from the pandemic, the industry may need to push for further rate adequacy. By the end of 2022, we should start to get a clearer idea of how the reopening of the courts will impact the market, Fitzgerald said.

“D&O claim frequency will likely remain flat in 2022,” said Fitzgerald. “As accident years 2015 to 2019 come into sharper focus, underwriting performance will likely be challenged, causing markets to reconsider the current rate environment. Covid will only make these decisions more complicated.

To learn more about QBE North America, please visit their website.

QBE North America is a global insurance leader focused on helping customers solve unique risks, so they can focus on their future. QBE operates out of 27 countries around the globe, with a presence in every key insurance market. QBE insurance companies are rated "A" (Excellent) by A.M. Best and "A+" by Standard & Poor's.

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