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Survey Report

Insurance Marketplace Realities 2019 — International casualty


November 6, 2018

Due to the importance of tight administration and collaboration on cross-border insurance coverage, servicing capabilities are just as important as coverage and price when selecting the right global insuring partner.

Rate predictions

  Trend Range
International casualty Decrease –5% to –10%

Key takeaway

Due to the importance of tight administration and collaboration on cross-border insurance coverage, servicing capabilities are just as important as coverage and price when selecting the right global insuring partner.

Rate reductions are available, with certain caveats.

  • Insureds who have not marketed their program in recent years, exercise consistent and effective risk management protocols to drive down loss activity, maintain quality underwriting data and leverage their purchasing with strategic carrier relationships, are most likely to benefit from the higher end of our predicted rate declines — or fare even better.
  • The continued rate softening is largely in response to increased capacity and competition in a space that overall has performed fairly well with regard to loss activity.
  • In many cases the markets writing global programs are also writing other lines with the same insureds, which helps them keep sustainable margins.
  • The quality of a global program should be measured by metrics beyond price, such as the timeliness and accuracy with which local policy documents are issued around the world, as well as by the extent to which the insured is empowered with transparency into the process along the way.

Capacity continues to g, despite continued merger and acquisition activity.

  • While the more experienced international casualty markets continue to expand capabilities to refine their offering and remain competitive, additional competition continues to emerge. The new competition is coming primarily from either established carriers entering the international market for the first time or European carriers with experience in global casualty who are expanding their offering to include coverage for U.S.-domiciled insureds.
  • For insureds with relevant exposure, European-based markets can offer distinct benefits:
    • Higher primary limits, available at global and local/admitted levels
    • Higher or full limits for certain coverages such as pure financial loss
    • Or extended products liability, etc.
  • Rather than differentiate purely through rate, carriers are building operational tools and leveraging technology, offering underwriting flexibility and enhanced clarity around coverage issued in each country.
  • Recent global carrier mergers have yet to reduce the abundant supply of capacity; rather, they have helped enhance market offerings as well as underwriting depth and expertise. Recent announcements of potential further mergers are likely to have similar results.
  • Underwriters are under ever more strict guidelines to require clear and consistent exposure information from insureds, limiting or even removing the ability to offer coverage for ‘if-any’ exposures as well as excess-DIC coverage over unknown local coverages in local geographies.

Changes in market regulation and issues of compliance remain a major concern.

  • Rising protectionism and state-driven regulation continue to impact the marketplace. Federal agencies are requiring use of in-country capacity rather than pure-fronts. Insurance and tax audits as well as regulations stipulating premium payment warranties (e.g., cash before cover) are also on the rise. Buyers should be aware that any restrictions on the exportability of risk and premium will limit the corresponding amount of underwriting and claim settlement authority that can be centralized.
  • Brexit is forcing carriers to reposition their Freedom of Service (FOS) infrastructure to locations on the European continent, requiring a fair amount of movement and re-training of staff. Additionally, insureds who may have received a FOS policy from a carrier’s U.K. office, also representing local coverage for the U.K., are likely to receive that admitted coverage separately at renewal.
  • While there is flexibility in terms of where international premium allocation can be invoiced and collected in most countries, offering insureds the ability to centralize a majority of the cash flow and administration, diligence is increasingly important for insureds to evidence a consistent and defensible premium allocation methodology in the event of program audits.

Global programs of all sizes are becoming more sophisticated.

  • Employers are under a greater obligation to ensure the safety of their traveling and overseas workforce. Buyers can support these efforts by taking a global approach to foreign voluntary workers compensation (FVWC), kidnap, travel assistance, benefits, etc.
  • For companies with existing global programs and business connectivity around risk, opportunities are available to streamline operations by leveraging relationships with a select number of global carriers, minimize coverage gaps, ensure economies of scale and open the door to multi-year deals.
  • For the buyers of large, complex global programs, clarity of coverage will be increasingly important, not just at the master-policy level but also at the locally admitted level. International commercial contracts can include specific insurance requirements that could impact program design.
  • Businesses are experiencing complex claims in a widening array of geographies, requiring a close examination of the necessary local coverage. Depending on the extent of the need, coverage can be accomplished through alternative risk structures, captives or manuscript policy forms.
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