US market has eye on innovation
The US re/insurance market is relatively stable and in good health as the industry gathers for the PCI conference in Miami this week—but carriers have one eye on cat losses and another on innovation and insurtech, Stefan Holzberger, chief rating officer at AM Best, told PCI Today.
“We have a stable market outlook for both the personal lines and the commercial lines sectors,” Holzberger said.
“The commercial lines segment is well capitalised, which is good news for policyholder security, but also serves as a driver of competitive market conditions in terms of pricing and terms and conditions.
“Commercial auto continues to be a loss leader for many carriers in the market, despite several years of rate increases. For personal lines, capital is also at a healthy level. In addition, reinsurance pricing remains favourable and capacity abundant. Rate increases in auto continue in an effort to offset rising loss severity trends.”
Looking at the 2018 hurricane season, Holzberger said that, similar to 2017, it was more of an earnings event for market participants.
For the majority, actual losses were in line with modelled expectations. Given this, pricing is not expected to rise due to competitive pressures and the ample capacity available in the market—this applies to both the primary and the reinsurance markets.
In terms of potential growth, Holzberger said, cyber is viewed by the larger commercial lines players and the global reinsurers as an opportunity for growth. Rates are decreasing in this line, but so far the performance has been very good. The bigger challenge is that risk-modelling capabilities are limited, so aggregate exposure management is difficult.
“Even so, re/insurers are able to get comfort putting out capacity without overly exposing their balance sheets to losses,” he said.
He added that there is a lot of hype around autonomous vehicles and that this is something most insurers are keeping an eye on, but not actively developing strategies to deal with at this time. He believes it will still be some time before autonomous vehicles chip away at the personal auto or commercial auto markets in a meaningful way.
“At AM Best, we are seeing virtually all companies, large and small, launch some form of innovation initiative aimed at improving products, processes, services or business models,” Holzberger said.
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