Risk manager’s job ‘more demanding than ever’ – Willis Towers Watson

North American commercial insurance prices are expected to soften gradually, bringing a welcome deceleration in premium rate increases and further stability in 2022, according to  Willis Towers Watson’s 2022 Insurance Marketplace Realities report.

After several annual cycles with steep, often relentless increases, the marketplace has taken significant steps toward “correcting” itself, said  Willis Towers Watson, a global advisory, broking and solutions company.

The report points to the forces that led to the hard market, including systemic rises in risk from heightened catastrophe losses likely driven by climate change, “social inflation” and rising exposures in areas ranging from cyber to liability, which have not gone away.

While  Willis Towers Watson predicts market moderation, cyber liability and fiduciary liability insurance are two exceptions to the general trend. Rates within these lines have been going up steeply, and in the case of cyber, the increases the report is forecasting for 2022 are even steeper.

“For the most part, we are moving toward stability as we watch the workings of a simple economic law — supply and demand,” said Jon Drummond (pictured), senior editor, Insurance Marketplace Realities and head of Broking, North America at  Willis Towers Watson. “That does not mean, however, that this is a simple marketplace. The two-tiered marketplace we highlighted in our last issue remains a reality in many lines of business; conditions are better for better risks and tougher — sometimes quite a bit tougher — for less attractive risks.”

The report points out that the risk manager’s job of distinguishing his or her organisation’s risks in the marketplace is more demanding than ever. More data and better data are required and expected, and the information must be presented in a way that is clear and compelling. Fortunately for insurance buyers, the tools to help analyse and present that data are getting better, too.

Another aspect of the new insurance marketplace has been brought on by COVID-19. “We’ve discovered we can do our work remotely, most of it anyway, and that the virtual world has some advantages,” said Drummond. “It’s easier to bring people together for meetings, and for insurance buyers, bringing the C-suite to the negotiating table can have noticeably positive effects. Those meetings are also easier to organise virtually with underwriters sitting across the world and in venues some risk managers may never have had the opportunity to visit. Employees within the industry — be they underwriters, brokers or risk managers — are enjoying the benefits associated with a commute to the living room versus the commute to the office.”

Willis Towers Watson makes reference to talent development and how the work-from-home environment will challenge leadership to find new ways to educate employees. “How is the industry responding to talent development in this environment? Today’s younger generation certainly faces a different world from what many grew up with in the industry,” explained Drummond.

The report concludes that the cost of insurance is still going up — for the near term. Most buyers will be paying more, but marketplace results should be less painful. The two-tiered market, which has always been a reality to some degree, is still in effect in many places, but the downside of being in the higher-hazard tier is not as bad.

“For better or worse, our industry will continue to move with the laws of supply and demand,” said Drummond. “If supply continues to come back as it has in the second and third quarters of 2021, we could see rate decreases commence as early as the second quarter of 2022. This will not be a wholesale development across all lines, and distressed lines of business, most notably cyber, will remain challenged well into 2022.”

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