London Market sees rates slowing in ’23; can grow ‘just above’ rate

Major London Market players anticipate a risk adjusted average rate change of 4.0% in 2023 across 40 key lines of business, down from both a rosier initial projection and a weaker final result in 2022, a  Howden London Market Appetite survey has shown. Ultimate premium growth should track “just above” that rate gain.

“Whilst prices across most commercial lines continued to rise in 2022 which was the fifth year of a hard market cycle, the annual increases are on a downward trend,” authors Paul Cumberland and Hamish Barcroft of Howden Markets wrote.

A 4.0% risk adjusted rate hike would represent a further step in a longer-run slowdown that has even gotten ahead of predictions. The survey panel had forecast a 7.6% rate gain 2022, but reported a result at only 4.6%. Growth in 2021 had been double digit. A majority of lines are posed for lower rate growth than in 2022.

Cyber and political violence and terrorism have the highest estimated rate increases for 2023 at 12% and 18%, respectively. “Current political and economic conditions, social unrest around the globe, and the ongoing war in Ukraine are combining to drive up pricing,” authors said of the run-up in political violence price forecasts.

The survey rendered “a broad and varied response” on appetite by line, with the average across forty surveyed lines equating to planned growth in the 5-10% range, “tracking just above” the planned gain from rate.

Open market new business appetite, measured by the difference between GWP growth forecasts over rate change forecasts, appears strongest for renewables, political risks, D&O, cargo and stock throughput and general aviation.

Anathema business lines by the same measured focus on North American property, brown industries like mining and downstream energy and terrorism and political violence.

For North American property, appetite remained flat year on year for low single digit growth even as risk-adjusted rate expectations for the line doubled from a forecast for 7% in 2022 to 14% for 2023.

Howden calls North American property “a highly distressed marketplace” even ahead of Hurricane Ian. Respondents offered “low appetite scores” for US cat even where estimated risk-adjusted rate gain is 50%. Only two brave insurers said they would dive in at the deep end “potentially seeking to ‘make hay’ whilst pricing conditions are favourable,” authors noted.

Appetite for new business via delegated authorities, in turn, looks strongest in product recall, fine art, private client retail, and marine cargo. The list of MGA-fed lines for reduction is a bit longer, including US property, terrorism, multiple areas of th4 energy business and some industrial.

The Howden London Market Survey was conducted amongst 43 London Market insurers, including 26 syndicates and 17 corporate insurers with appetite and pricing measures across 40+ lines of business.

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