A new State of the Market Report from Risk Strategies, a specialty insurance brokerage and risk management firm, has advised clients to settle their reinsurance negotiations as soon as possible, due to an expected shortage of capacity at the upcoming January renewals.
CEO John Mina stated that businesses are currently facing an uncertain economic outlook as well as unprecedented disruptions in the insurance market.
These include new risks, shifting assumptions, and uncertain macroeconomic conditions, with rising interest rates and inflation driving up prices and reducing earnings.
At the same time, catastrophic weather events are becoming more frequent and severe, putting underwriting models, pricing, and capacity to the test, and Hurricane Ian could be the most expensive storm in Florida history.
In addition, many businesses are dealing with social and behavioral shifts such as shifting workforce expectations, rising claims court and litigation costs, and general shifts in attitudes.
Against this backdrop, businesses have experienced difficult markets over the past year, according to Risk Strategies, particularly in the Cyber, Property, Excess Liability, Directors & Officers, and Auto insurance lines.
Rate increases are expected for most lines of insurance, particularly for businesses with a poor loss history and those located in disaster-prone areas.
The report also emphasized the ever-increasing threat of cyber-attacks and ransomware, implying that cyber will likely remain difficult in the short term, despite recent signs of rates slowing.
“Now, more than ever, clients should get out into the market early because we expect a race to find capacity as 1/1/2023 approaches,” according to the Risk Strategies report.
Looking ahead, Risk Strategies sees some reasons to be optimistic about the economy, including job growth, historically low unemployment rates, and strong business earnings in many sectors.
Sustained rate increases have enticed some new entrants, creating opportunities for those with capacity and brokers who can access it, according to the report.