• 13 January 2021

A look back at market conditions, rates and capacity during Q4 of last year and impact on 1/1 renewals.

Renewals and market conditions

  • Similar to what we saw throughout 2020, marine liability underwriters continued to push rates on the 1/1 renewal book. However, we are now seeing separation between risks that underwriters consider ‘working layers’ and those that are deemed high excess capacity risks.

  • In respect of ‘working layers’, where the business was loss free and with no change in exposure, the minimum increase sought by insurers rose to 12.5%. The upper boundary of the range seen in Q3, however, remained stable at 15%.

    Conversely, there has been a marked change regarding what is considered the minimum price for capacity. The perception is that the long, high excess layer stretches have been under-priced for some time and have not taken inflationary rises into account throughout the years. Underwriters are attempting to correct this by applying rises upwards of those seen in the below table, however we are ensuring they take into account the individual merits and starting position of each policy. 
                 Quarter   Market Rate Rise
   Q1 2020  5% - 10%
   Q2 2020  7.5% - 12.5%
   Q3 2020  10% - 15%
   Q4 2020  12.5% - 15%


  • Due to the ongoing Covid-19 situation in the UK, broking discussions continued to take place remotely, with underwriters and brokers utilising video calls for discussions and electronic placing software for binding 1 January renewals. Whilst organising diaries for video calls can be time consuming, Lloyd’s Placing Platform Limited (PPL) provides instant bind capabilities, speeding up the process by allowing the submission to be bound by multiple markets simultaneously. 

  • Insurers' senior management are keen to drive a more centralised decision-making process, involving actuarial teams not only in the modelling of account exposures but also giving them more influence in the overall decision of whether to write an account or not. This approach can create difficulties in obtaining support where underwriting and actuarial views differ and in these circumstances, we are able to involve our own actuarial team to support negotiations with markets. 

  • Marine liability insurers were still discussing their own treaty reinsurance terms close to 1 January 2021, resulting in a delay in being able to articulate the exact terms and conditions available on their inwards business, specifically regarding Covid-19 / communicable disease and cyber exclusions. The initial stance from the treaty market was stronger than had been expected, however, the consensus within the market has been to include the following two exclusions:
                      1. Marine Cyber Endorsement (LMA5403) – a malicious cyber exclusion.
   2. Coronavirus Exclusion Clause (LMA5395) – excluding transmission, or alleged transmission of the virus.
  • The extent to which buy-backs are available remains to be seen, however we are in constant dialogue with the market to ensure our clients have the best available cover. 

Market capacity

During Q4 2020, it became apparent that some of the new capacity entering the market have appetite for marine liability business. Two start-ups, Inigo and ERS made Head of Marine and Energy Liability appointments at the end of 2020, though remain unlikely to be writing business until at least Q2 2021.

The addition of at least two new entrants looks likely to result in an increase of capacity within the marine liability class for the first time in 18 months. We will be monitoring the ‘Class of 2020/21’ position closely, engaging with new markets wherever possible. 

It was also reported by the insurance press that a number of companies were set to take advantage of the hardening market through increased investment and rigorous growth plans. However, the impact of such capacity increases and emergence of follow-only syndicates has been limited at 1/1 as some markets have also scaled back, altering their focus and appetite for certain business.

As always, we endeavour to keep our clients informed of key market movements at the earliest opportunity, particularly those that may impact your business.