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The majority of businesses in the UK and Germany are exploring alternative risk transfer solutions, including new and greater use of captives, for their 2020 renewals, according to two surveys of those insurance markets.
The surveys, conducted by Airmic and the German Risk and Insurance Management Association (GVNW), respectively, revealed that 65 percent of UK businesses, and 53 percent of German businesses, are looking into the possibility of implementing such arrangements.
In addition, 33 percent of UK businesses, and 46 percent of German ones, plan to invest more in risk management solutions, Airmic and GVNW said.
Rates have risen for more than nine out of ten businesses in both countries, the surveys revealed. This is not only pushing up prices but reducing capacity, increasing exclusions and shutting some businesses out of cover altogether, the surveys found.
Directors and officers rates have been hardest hit, with over 80 percent of respondents noting price rises in the UK and over 60 percent feeling them in Germany.
Growing frustration at poor or late communication from insurance partners could be playing a part in encouraging businesses to consider captives. The surveys found that 43 percent of businesses in the UK, and 62 percent in Germany, expressed such frustrations, while over half of policyholders are only partially satisfied or not satisfied with service from brokers.
Joerg Henne, managing director of GVNW, said: “Communication and transparency need to improve and good risk management should be rewarded. Businesses understand their risks better than ever before and the fact that we are seeing risk professionals exploring alternative risk transfer solutions for 2020 renewals should be a wakeup call to the market.”
Julia Graham, deputy CEO and technical director at Airmic, said the current hardening market is unlike previous hard markets, which were cyclical and focused on price, without bringing the same capacity constraints.
“There are also early signs of changing claims behaviour which we are monitoring closely,” she added. “This is a seismic shift. To stay relevant, the market must become more customer-centric, make better use of technology to improve service, and provide more innovative solutions.”
Airmic, German Risk and Insurance Management Association, GVNW, Joerg Henne, Julia Graham