BUSINESS HELPDESK
THE HARD MARKET EFFECT HELP DESK
When it comes to the renewal of business insurance, merchants may struggle to obtain cover at a similar premium to previous years due to rate increases caused by the hard market. Alan Tattler, Divisional Director, Specialist Risk Group explains why, and offers advice.
ALL INDUSTRIES GO through cycles of expansion and contraction and the insurance industry is no different. In insurance, we run on cycles of ‘hard’ and ‘soft’ markets, both of which can impact commercial businesses in different ways.
Currently we are experiencing a hard market, meaning that the demand for insurance exceeds the supply available by insurers. Characteristics of a hard market include low competition among insurers, increased premiums, reduced coverage, charges for cover extensions, harsher interpretation of claims and in some cases, there will be no cover available for clients. In short, a hard market can make it extremely difficult for a business to obtain commercial insurance cover at an affordable rate.
Rate increases are not a way for insurers to protect profits, instead they ensure the insurer is financially secure enough to protect and insure clients and pay claims. It’s important to understand the factors contributing to the current hard market, and the steps you can take to ameliorate them.
Several events and factors in the last two years have contributed to the hard market:
1) Solvency II – Insurers are having to double their reserves to meet the Solvency II regulatory requirement, leading to lower investments and less profit. Many insurers will therefore write less business or reduce their appetite to meet these requirements. 2) Ogden rate change – This calculation is used to determine how much money insurance companies should pay as
18
you can carry on building your business without having to worry about increasing insurance costs. Fortunately, our expert team can help navigate the hard market due to our outstanding relationships with insurers and high-risk underwriters that allow us to negotiate affordable, comprehensive cover.
As the BMF’s strategic partner for the provision of business insurance, we specialise in providing innovative risk management advice to builders merchants and suppliers. We will ensure you have the correct processes in place to protect your business, making it more appealing to insurers during the hard market.
compensation to people who have suffered life-changing injuries. The negative Ogden rate has significantly increased Liability rates and the rates of most Motor and Liability books have had to increase to cover these.
3) Low Commercial Property Insurance rates – At the end of 2019, the property insurance market was running on loss making rates. Regardless of what was to happen in 2020, these rates would increase.
4) Flooding – It is estimated that Storms Dennis and Ciara in 2020 could cost the industry over £500 million in Property Damage and Business Interruption claims. With climate change, flooding is only going to become more frequent and insurance rates will need to increase to reflect this.
5) Reinsurance rates – Reinsurance premiums are rising significantly, well into double figures and are estimated to increase by over 20%.
6) Interest rates at an all-time low – Insurers will have to set rates for capital reserves, not just for growth as they do not have investment income to rely on as they have in past times. 7) COVID-19 – Although most COVID-19 disruptions were not covered by insurers, the small percentage of Business Interruption coverages are estimated to cost insurers billions of pounds. The full impact on the insurance sector with regard to other classes of business such as Directors and Officers together with Liability insurance is yet to be established.
How Specialist Risk Group can help Last year was a challenging time for builders merchants and suppliers due to lockdowns, temporary closures, new restrictions and so on. Now more than ever, it is vital that
We have a thorough
understanding of the risks your business faces, and the types of cover required to protect it. Our expert team can undertake a review of your existing insurance programme to highlight premium reductions, cover enhancements and service improvements we can make to lessen the impact of the hard market and ensure you get the best possible service from an insurance broker during this time. BMJ
For more information on how our offering for builders merchants and suppliers can benefit your business, please visit https://
srinsurancesolutions.co.uk/ service/builders-merchants- suppliers/, or contact Alan Tattler at ATattler@
specialistrisk.com or on 07867 369939
www.buildersmerchantsjournal.net October 2021
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
