While insurers continue to pursue rate increases where possible, overarching ambitions to retain desirable business and increase gross written premium (GWP) act as a meaningful counterbalance.
The big picture:
- The casualty insurance market has achieved profitability for a second consecutive year after an 8-year stretch in the red
- Rates may be reaching their peak, attracting more capacity and encouraging existing market participants to make full use of maximum line sizes
- Social inflation has resulted in claims increasing in frequency and quantum
- Exposures such as tailings dams, ESG and geographic location of the risk continue to meaningfully impact underwriting decisions
Casualty markets remain profitable for a second year
But potential headwinds are tempering insurer appetite
Last year, Lloyd's of London reported a return to underwriting profitability for the casualty insurance segment for the first time in eight years. This has been achieved for a second consecutive year. However, growing concerns around how both economic and social inflation are leading to greater uncertainty around underwriting reserves in the casualty market.
Rates may be reaching their peak
And underwriters are in a balancing act
Recent stability is attracting capacity to the mining sector and encouraging existing participants to increasingly make full use of maximum line sizes, which is further increasing pressure on rates. Underwriters are walking a tightrope of pushing for rate increases where deemed necessary, without jeopardizing positions on programs that they are keen to retain.
There has been a small uptick in global liability capacity
Indicating that (re)insurers are proceeding with caution
Whilst the total headline global liability capacity has only marginally increased from $3.05 billion in 2023 to $3.1 billion in 2024, we estimate that the realistic capacity for mining risks has increased by a slightly larger, albeit still modest, percentage from $550 million to $600 million. Meanwhile, factors including attachment points, territories, tailings, dams and ultimately the scale of mining operations continue to have a significant bearing on limits available.
Claims trends are putting reserving under the spotlight
Social inflation pressures emerge
Despite an absence of major mining losses to the London insurance market in recent years, increasing social media pressures and third-party litigation funding are driving an uptick in the frequency and quantum of claims.
The increase in loss awards more generally has called into question the adequacy of reserving and there is a general sentiment in the market that reserving may have been inadequate for several years.
Markets are reacting to changing risks
Different exposures have weight to impact underwriting decisions
Tailings dams: Following several large catastrophes over the past decade, there is continued market scrutiny on safety standards. Markets expect a complete set of information per tailings storage facility.
ESG: Insurers remain motivated to look more favorably upon clients that are armed with strong ESG credentials and a compelling climate transition plan to help differentiate themselves from their peers.
Regional pressures: A higher concentration of catastrophe events in countries such as Brazil has reduced capacity for mining operations located in Latin America, limiting the amount of competitive pressure. Looking ahead, operations located in Turkey are likely to come under greater scrutiny following the heap leach mining disaster earlier this year.
Underwriters recalibrate overall mining exposures: This includes homogenizing positions on poly- and perfluoroalkyl (PFAS) substances, an increase in worker fatalities and serious injuries across the mining industry, and emerging exposures such as those posed by battery fires.
Preparing for the year ahead
There's a smarter way to risk
Insureds can position themselves for success by:
- Thinking strategically about risk placement strategies
- Capitalizing on evolving insurer appetite and available terms
- Unlocking opportunities through data-driven insights
To read more on how insurers strike a balance between rate hikes and business retention, please download the full article below.
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A tipping point: International liability markets balance stability and innovation
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