Like many things, Insurance is a cyclical market. It moves from ‘soft’, when premiums are lower, cover is available and insurers are competing for business - to ‘hard’, a time when premiums rise and becomes a ‘sellers’ rather than ‘buyers’ market.

For at least 15 years we have been in a sustained ‘soft’ cycle, meaning that businesses haven’t had to focus too much on their insurances. There has been plenty of competition between insurers and brokers have been able to secure terms easily.

This is changing at a pace many of us have never seen before. We are rapidly moving into a ‘hard market’ - with analysts projecting that it will be ‘the hardest market in a generation’.

Why is this happening? - Well there are a myriad of factors including significant increases in claims costs, the loss of investment income due to prolonged historically low interest rates and of course the impact of the Covid pandemic globally.

We must also accept that certain areas of the insurance market have been ‘ultra-competitive’ and effectively writing business at a loss for a number of years, covering those losses by investment income. With interest rates at a 300 year low, Insurers now have no alternative but to return to profitable underwriting.

Not only will this lead to significant premium increases - it will also result in the cover available being restricted.

One sector that is being particularly hard hit is property, primarily due to historically low premium rates and significant losses. It is no longer unusual for insurers to reduce the amount of cover they will offer, refuse terms altogether, or to seek very substantial premium increases.

Interestingly insurers appear to be adopting a very specific, case by case approach with the impact on each risk varying significantly. There are many factors driving these decisions, but the overall theme is that quality - well managed risks are being impacted to a lesser degree.

In a soft market it is relatively easy to obtain competitive terms and the information insurers require is often more limited. As the market hardens and insurers become more selective, a substantial amount of additional information and an entirely different approach is required to obtain the best terms.

With limited capital available, Insurers now need to be persuaded to use it to provide you cover - rather than someone else. In order to do this, we recommend:

• Undertaking a review of your current insurance needs - they may have changed since your last renewal - especially given the impact of Covid 19. Your existing program may be providing cover you don’t need, or you may have ‘gaps’ as a result of changing risk conditions. (If you are not already a client of Berkeley Insurance Group we can provide a free and confidential ‘Silent Review’ to achieve this for you.)
• Ensuring all valuations are up to date and that you have full ‘risk information’ available. This will form the core of any negotiations with Insurers. In addition, if insurers are not confident in your valuations, they may apply restrictive terms. Again, we can help you ensure that your risk is properly presented.
• You may wish to consider ‘Risk Surveys’ at key locations. (By working closely with Underwriters, we can usually achieve this without cost to you).
• Identify properties that are likely to be a challenge, such as those with cladding, non-standard construction or flood issues. A specific plan will be required to ensure cover is obtainable.
• Consider a ‘Risk Improvement’ program - again for many of our clients we can obtain bursaries from insurers to fund this. This not only improves the risk, it also demonstrates to insurers that you take your insurance and risk seriously.
• Carefully consider the insurers you wish to engage with and start working with them well in advance of renewal. It is now crucial that you have an insurer with a risk appetite that matches your profile. Insurers may have changed their focus since your last renewal.

In summary - the hard market means that it will be more difficult to obtain cover and to control premiums. You therefore need to prioritise your insurance management and ensure you are receiving the right advice from a specialist broker.

Berkeley Insurance Group have been a ProCon Patron for many years and we are committed to supporting the membership. In these challenging times it’s important that Leicestershire businesses work together and support each other.

Mark Hayward BA (Hons) Chartered Insurance Broker, Director

• 0116 261 4761
• mhayward@berkeleyinsurancegroup.co.uk