The benefits of experience

Before the COVID-19 pandemic, our market was already changing, with hardening rates, access to capacity and capital shifting and increased underwriting scrutiny.

As such, brokers were beginning to have difficult conversations with clients and the underwriting community about pricing, terms and capacity that many younger practitioners have simply not yet experienced in their careers. Add COVID-19 into the mix, and we have an exceptional set of circumstances leading us to 2021.

Among the challenges, companies are having to address the adequacy and accuracy of disclosures in an environment with much uncertainty in the short and long term. They are facing the challenges of balancing the needs and priorities of diverse interests among employees, clients, service providers, shareholders and other stakeholders, inclusive of increased claims activity centred around COVID-19.

In addition, they are impacted by regulatory and compliance hurdles brought on by this operating uncertainty. Internally, workforce and operational adjustments can derive new unanticipated risks for companies. Moreover, reputational risks may arise from external perceptions (whether accurate or not) of how management has responded to the pandemic.

Insurers need to address these issues as they seek to rationalise their portfolios due to years of depressed rates. Management liability insurance, for example, was already experiencing considerable challenges and the COVID-19 pandemic has only exacerbated this. The long period of inadequate pricing combined with increasing loss costs has created an environment where most insurers are reducing capacity, increasing premiums and drastically adjusting their portfolios.

Assessing risk

Risks are garnering more intense underwriting scrutiny and insurers are either imposing stricter policy terms or requiring a significant increase in detailed information in order to avoid imposing COVID-19 exclusions.

Many insurers now have COVID-19 questionnaires seeking to gather information from insureds relative to the impact on financial results; operations; product/services; industry concerns; liquidity/solvency; and cyber risk.

The time involved in this process is again putting a squeeze on resources, particularly in contrast with the previous environment where the excess market was highly commoditised and markets were generally happy to follow the lead and/or the underlying insurers.

As a consequence, we are seeing a trend towards focusing on the renewal of current clients’ business, rather than looking at new business opportunities, which can be more time-consuming to review.

Meanwhile, although the trend on rates is certainly hardening, there are no certain outcomes. We are seeing some renewal rates increasing by double digits, while others are significantly higher multiples of the expiring pricing.

For brokers, this means that we are advising our clients to get out in front of the process as soon as possible and develop a sound plan when presenting risks to the underwriting community. This is where a knowledgeable and experienced broker is absolutely central to the outcome for both client and underwriter.

Creative solutions

In Bermuda, we are a long-term market that has not traditionally embraced the same cycles as the rest of the global re/insurance market. This consistency is a proven benefit in the current environment, with the ability to offer capacity and creative solutions when they are needed.

Bermuda is therefore seeing an increase in business from traditional sources, medium to large US independent retail brokers, and also from others such as US wholesalers who are looking for capacity from all geographies. Bermuda is offering the capacity and creativity that the market needs to respond to these challenges, and because of this we have a vital role to play.

In the current market, everyone is working twice as hard simply to stand still. This is where an experienced broker, which has worked through challenging conditions before, can offer creative and independent solutions.

Given the size of the Ed Bermuda platform, we are able to train the younger members of our team to understand these vital broking skills. When I started broking in New York during the hard market of the early 2000s, it was the kind of market where experience stood out, ultimately resulting in better outcomes for clients and underwriters.

Moreover, brokers understood the risks they were presenting the market, and the conversations we needed to have. That is what we are doing now as we build out the Ed Bermuda platform. Here we are again.