24 February 2023Analysis

Mactavish: insurance buying conditions remain difficult

The insurance market is currently going through the longest ‘hard’ phase in history, with prices spiking, cover being withdrawn and dispute rates soaring, according to a new report by insurance buyer Mactavish entitled: “Has the insurance hard market reached its peak?”

In the report Mactavish said: “Recent press coverage has predicted softening of conditions in some areas, but in our view this underestimates the seriousness of risk and economic developments arising from current crises. It also misunderstands the data, whereby a reduced rate of increase is not the same thing as a reduction.

“It is unfortunately likely that buying insurance is going to remain challenging for a good while yet.”

According to the report since 2018 premium rates for commercial insurance have risen inexorably to reach a 100% cumulative increase by Q3 2022, according to Mactavish’s analysis of data from Marsh. This masks a far worse picture for some classes, such as cyber insurance or financial lines overall, which have risen by more than 250% over the same period.

The report notes that the UK economic climate since the onset of the insurance hard market in 2019 has undergone a number of huge risk events in quick succession: Covid, Brexit, Ukraine, the supply chain crisis, prolonged political and financial market instability, an explosion in malicious cyber activity, energy and cost of living shocks and a looming recession.

It adds: “All of these affect the level of risk in the economy, both directly and via the rate of business operational adaptation which drives risk profile across all insurance classes. Against this backdrop, in 2023 it is extremely optimistic to expect the hard insurance market to soften quickly: we expect that insurance cost will remain high, cover will continue to be narrowed and the process of both policy placement and claims negotiation will remain extremely challenging.”