Underwriters urged to innovate in order to survive in major industry

Underwriters urged to innovate in order to survive in major industry

Underwriters urged to innovate in order to survive in major industry Willis has urged underwriters to innovate to ensure their survival in the energy market.

The global brokerage believes that a wider range of new products and services is a must in the competitive energy climate as record amounts of capital and reduced premium income have put underwriters under pressure.

A combination of the recent oil price collapse, benign loss records and the market capital rate have contributed to “some of the most competitive energy insurance underwriting conditions for 15 years,” according to Willis’s Natural Resources Market Review released last week.

Alistair Rivers, head of Willis’s natural resources industry, noted that the energy market is ripe for innovation from underwriters and insurers as a way to differentiate themselves in an otherwise crowded market place.

“In this underwriting climate, we believe that the time has come for more innovation, for new products and services to be developed to attract the interest of the buyer,” Rivers said in a statement.

“At Willis, we believe that it is the London market, as the traditional innovators of natural resources industry risk transfer products that should lead the way.”

In the latest Natural Resource Market Review, Willis highlighted several key areas of risk that underwriters could feasibly offer a more flexible coverage or brand new product and included cyber, onshore terrorism cover and construction products.

“We still see very little sign of the energy markets being willing to delete the cyber exclusion (CL386) in their policy wordings– despite a gradual softening of reinsurance market resistance to this exposure,” the review said with a specific look at cyber coverage.

The majority of construction innovation could come at the time of handover for major projects as the review notes that this is a key stage in the claims cycle.

“Over the years we have seen disputes arise on a number of occasions when loss or damage has occurred at or around the time of the handover of a project, with both construction and operating markets denying liability – much to the consternation of the client.

“It seems to be logical for carriers to produce a seamless product that might avoid such coverage ambiguities in the future,”
4 Comments
  • Lulu 15/04/2015 10:02:22 AM
    The trouble with innovation is that brokers struggle to sell these new products. Cyber is a good example. Cover under Cyber is far greater than just Privacy breaches, it is also a 1st party cover which financial lines brokers just can't seem to get their heads around. There are a variety of Cyber products in the market which are all different yet brokers seem to fail to understand the differences instead just focussing on price. Many brokers deal only in markets which do not have product differentiators so reading a wording and understanding differences is not what they do.
    I agree innovation is good and necessary, it is people who need to stop the 'same same' mentality and move with the times.
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  • Phil 15/04/2015 3:14:34 PM
    I do not know whether you are an UW or Intermediary Lulu but I take great exception to your comments that brokers can't seem to get their heads around it. Speaking with over 40 years experience in this industry, most in underwriting and senior management roles I cannot speak highly enough of the role brokers play and the extent to which brokers are required to ensure that not only their compliance obligations are up to the highest standard but that their insurance knowledge across a broad spectrum of products, Cyber included, is also to a very high standard. I have met very few brokers who would not fit this level of professionalism so be careful with your generalisations.
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  • Pete 15/04/2015 4:01:23 PM
    Well Phil, it appears you have been the lucky one in the last 40 years! My experience of over 35 years follows very closely to Lulu's experience in that brokers, no matter whether they are selling simple, complex or niche classes, tend to focus on price and are unable to explain, or unwilling to highlight, wording differences.
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