As we continue down the road of the easing of Lockdown businesses are finding how they must adapt to the new way of working perhaps just for the time being but also for the longer term too.

As you will be aware Mercia Insurance Brokers is an Appointed representative of Adler Insurance Brokers who have put together a Covid19 Response Questionnaire. This I attach. I hope you find it useful.

Last week I outlined some of the factors which are coming together at the same time and will inevitably lead to increases in premiums over the coming years. On top of those factors referred to last week the industry is also faced with the following:

Solvency – Insurers are required to keep a minimum level of solvency – and rightly so – to ensure that they can meet their future obligations to pay claims etc. When the solvency requirement was tightened some insurers were either unable to comply or could see that they would struggle to do so. Some therefore sold / merged reducing capacity in the market

Ogden Ruling – Insurers were until 2017 able to reduce the settlement payment on long term injury claims to reflect the interest that the claimant would receive on the payment in the coming years assuming investment. As interest rates fell this was reviewed and determined that insurers would in fact have to pay more than the settlement figure. Although this was further reviewed in 2019 it remains that insurers still to have to add 0.25% to any settlement. When the mathematics is applied the additional reserves insurers need to add to claims is substantial.

Reinsurance – If insurers are incurring losses and in some cases reverting to their reinsurers, the cost to insurers of buying reinsurance in the future will rise. Not only that but reinsurers may require that insurers no longer write certain types of insurance or business sectors.

So what does this all mean?

Some say there will be premium increases on average of 15% – clearly this will vary by sector and policy class and also be reflective of your claims experience. The ‘Hard Market’ could last for 4 or 5 years at least.

The high risk liability trades are just one example of a sector which may become less attractive to insurers.

It is going to be vital that risk management is to the fore and that this can be demonstrated to insurers

Naturally I will be looking to work with all of you to ensure you get the right deal for you from insurers.

As ever if you have any queries or concerns do get in touch with me.

Steve Sawrey 15th June 2020