In this chapter of our Annual Insurance Review 2020, we look at the main developments in 2019 and expected issues in 2020 for international property.
Key developments in 2019
As predicted, the property and casualty market continued to experience rate increases in 2019. There was a slight acceleration in this trend as against the previous four quarters. Following large catastrophic losses in 2018, insurers withdrew capacity in geographical areas hit repeatedly by natural disasters. Underwriters also imposed significant rate increases on accounts which had experienced heavy losses.
Insurance linked security (ILS) structures remained a hot topic. Demonstrating their increasingly varied use, Pool Re launched the first cat bond to cover the risk of terrorism. Elsewhere in the world, IAG launched the first ILS bond in the Singaporean market. However, ILS investors suffered as a result of the large losses in 2017 and 2018, and likely as a result of this, the first quarter of 2019 was the second lowest for ILS uptake in the past eight years.
With awareness around the potential cyber risk loopholes in property policies having increased, insurers have moved to tighten their wordings. Property underwriters have not been offering non-damage cyber cover as standard. Where it is offered, it is for an additional premium. Pricing has faced some adjustment as further data on cyber losses and their quantum gradually becomes available.
Natural catastrophe losses for 2019 have come in below the yearly average. The hurricane season presented some "strange" conditions, with all but two of the Atlantic Ocean storms having been relatively weak and short-lived; Hurricane Dorian caused a historic tragedy in the Bahamas and Hurricane Lorenzo travelled the furthest east of any hurricane recorded at that strength. The key drivers of 2019's losses have been regional flooding and thunderstorms.
What to look out for in 2020
2020 is set to be an exciting year for technology in the property market. Following a number of years of investment by insurers, technologies are starting to have an impact on the day to day work of underwriters and claims teams.
Advances in hyperlocal weather analytics provide the opportunity for claims teams to gain a quick understanding of how likely insured properties are to be impacted by natural disasters and to plan and execute their response appropriately.
Drones are increasingly becoming the norm for carrying out property inspections. They allow entry into unstable structures and inspections of roofs and large items such as boilers without the construction of scaffolding and risks to workers. However, with several jurisdictions tightening their laws, this could put the brakes on drone use in 2020 as insurers must ensure that their use is compliant in different jurisdictions.
As cyber-attacks have become increasingly sophisticated, a number of insurers and start-ups have developed tools that assist with the modelling of the potential quantum involved in risks. These provide an opportunity for underwriters to back up their decisions in what is still a relatively new (but growing) market, and consider how to price cyber as an add-on to property policies.
Alongside these technological developments, we have seen optimism about a return to profitability in 2020. Rates are projected to continue to increase and, as 2019 was a relatively benign year for losses, we may see some returns after a challenging few years. That said, the property market is always at the mercy of the weather.