[00:00] Guest: I think a hard to place risk has a uniqueness about it.

[00:02] Guest: Today, I'd say hard to place markets or risks are much less difficult to place.

[00:07] Guest: Collaboration also depends on clients taking an active role in the process as well.

[00:13] Paul Lucas: Hello everyone, welcome to Insurance Business TV for a special on how insurers can work with brokers to find solutions for hard to place risks brought to you in association with Echelon Insurance. Now, in this edition, we're going to look at evolving market conditions and how successfully navigating those challenges means stronger collaboration between brokers and insurers, but how is that achieved?

[00:37] Paul Lucas: Well, to talk us through it all, we welcome Scott McIntyre, Director, Specialty Lines at Echelon Insurance, Everett McCallum, Director, Technical Risk Services at Echelon Insurance, and Asker Molulu, Chief Marketing Officer at HUB International Ontario. Gentlemen, welcome aboard. I'm going to kick off by asking you, what does hard to place actually mean in today's market? Indeed, how has insurers' risk appetite for these accounts shifted as CAT frequency and severity have increased? Scott, can I start with you?

[01:09] Guest: Sure. I think when people in our industry hear the term hard to place, some people may go directly to poor quality risk. In my view, that's really not often the case. I think a hard to place risk has a uniqueness about it, maybe a complexity. Basically, a risk that doesn't fit neatly within the standard risk appetite of many of the insurers in our market.

[01:34] It could be for a number of reasons. It could be class of business, loss history, the required limits, operational complexity, and catastrophe-prone regions play a part as well. I think the definition of hard to place may be changing as CAT frequency and severity have increased. What may have been a standard risk in the past, if it's located in a certain geographical location, may have become non-standard or hard to place as insurers focus more on location and particularly accumulation of values in certain CAT areas.

[02:03] In these situations viable solutions may require different terms and deductibles, reinsurance solutions, or participation from multiple insurers to make solutions work. Ultimately, an important piece is accurate replacement values and business interruption information so that insurers can really assess the true exposure and deploy capacity.

[02:34] Paul Lucas: Oscar then, is it any more difficult to place now compared to perhaps the recent past?

[02:41] Guest: I'd say I agree with everything that Scott went through right there, but I'd say the current market cycle has meaningfully narrowed that definition. Today I'd say hard to place markets or risks are much less difficult to place.

[02:56] The current market is creating real opportunity for our clients who previously struggled to find capacity for the reasons that Scott outlined. At HUB, our advisors are able to find and provide more options, expanded coverage, and secure better terms and conditions than we were 18 to 24 months ago.

[03:16] For clients not considered hard to place, the current market is a key moment to secure high limits. We encourage clients to act while capacity is available and out there for them. Strategically considering domestic capacity for our accounts and our clients currently with non-standard insurer partners is a meaningful long-term strategy for us to deploy. We're actively engaged in trying to make all of that happen in the current market condition.

[03:40] Paul Lucas: Oscar alluded to it a little bit there, Scott. Of course the market is softening in several lines. So how do insurers balance competitive pricing pressure against the risk discipline that is needed to keep capacity alive for the riskiest accounts?

[03:54] Guest: I definitely think competitive pricing pressure is strongest on stable and well-performing business. The type of business that every insurer would be happy to write. I think underwriters still need to maintain that underwriting discipline to ensure terms, pricing, and capacity remain aligned ultimately with the underlying exposure.

[04:19] When we talk about hard to place business, I think it's really important in a soft market to slow down and engage, focusing on understanding the full exposure of these complex risks, including the potential for large or complex claims.

[04:31] Underwriters need to select risks that make sense within the broader insurer portfolio. That risk discipline can be maintained through applying deductibles, sublimits, creating different attachment points for different insurers to participate on. Ultimately, insurers need to be very careful with the decisions they make on how much capacity is deployed for these more complex risks.

[04:57] Paul Lucas: And Scott, when a broker brings forward a genuinely difficult risk, what separates a productive conversation with an insurer from one that goes nowhere? And indeed, what can brokers do earlier to present the risk, quantify exposures, and demonstrate proactive risk management steps that would improve the likelihood of finding a viable solution?

[05:19] Guest: I think you hit the nail on the head with earlier engagement. That's the key, particularly for hard to place and CAT-exposed risks. Brokers should bring difficult risks to insurers as early as possible.

[05:34] The other key value is transparency and honesty. Really explain why a risk may be hard to place or what may be difficult to place, and not leave it to the insurer to have to trawl through the submission to discover what the issues are.

[05:53] Reliable values, accurate business interruption information, and a clear overview of the client's operations are essential. Explaining past losses clearly and any risk mitigation strategies that the client has put in place. Ultimately managing expectations with the client around what's capable in the marketplace and how we can structure different solutions. Basically working collaboratively with the broker to find those solutions is the key.

[06:24] Paul Lucas: Yeah, and I guess as well, Oscar, there is a really strong need to be proactive.

[06:29] Guest: Absolutely. Scott hit it on the mark there in terms of collaboration. I'll speak from a HUB perspective. Our advisors are really proactive with our insurer partners. It's something we want to engage in. We want to be at the table having these productive conversations early on and, to be frank, these conversations start with a story, not just a submission.

[06:54] It's important that we outline the context, what the client is doing from a risk management posture, and have a clear placement strategy regardless of the cycle that we're in. Today more than in the past, we see our partners competing for business, so it's important that we're doing our best to quantify exposures through engineering assessments and risk modeling concepts.

[07:16] We get deeper engagement than simply just sharing limited details with policy schedules. I think our insurer partners respect and appreciate that of us. Our advisors are actively using this window to look for better terms, expanded coverage, and higher limits for our customers.

[07:34] We do that in unison with our partners because we understand that this is a moment in time for us in this market cycle and it's important that we take advantage of it.

[07:45] On our side, we continue to invest in building these relationships and trust because when the market shifts and it tightens, it helps us build a rapport for our clients with our market partners so that we're not starting from scratch.

[08:00] We'll both have had a chance to better understand the client and their keys to their long-term sustainability.

[08:06] Paul Lucas: Yeah, and just to bring it back to you, Scott, again, where have you seen the most creative solutions emerge right now, whether that's program design, layering capacity, alternative risk transfer structures, or indeed something else, just to keep those hard-to-place risks insurable?

[08:21] Guest: I think you nailed it. This is what we're seeing. We're seeing more structured program approaches to large hard-to-place accounts.

[08:30] Primary excess layering, allowing multiple insurers to participate at different attachment points, is key to allow insurers to manage their exposure to large CAT exposures or large complex risks and claims.

[08:44] We're seeing, in certain instances, higher deductibles and self-insured retentions that can keep difficult risks insurable ultimately, particularly when the client has the financial strength and the risk management maturity to retain some of the more predictable losses in the primary layer.

[09:05] For CAT-exposed accounts, targeted sublimits and careful consideration about probable maximum loss can help insurers really measure their exposure to risks and determine where the most appropriate place to provide capacity is ultimately.

[09:24] Paul Lucas: Yeah, and Everett, I apologize I haven't brought you into the conversation yet, so perhaps you can tell me how the role of risk mitigation is evolving, particularly as emerging challenges in the specialty market become increasingly significant drivers of risk exposure.

[09:38] Guest: Of course. In my mind risk mitigation is becoming more forward-looking, particularly in the specialty market where exposures can evolve very quickly. Emerging technologies, changing operations, and climate conditions can create risks that have not yet been reflected in a customer's loss history.

[10:00] Insurers and particularly their risk engineering teams must be able to anticipate those changes and determine whether the existing controls will remain effective.

[10:09] Lithium-ion batteries are a practical example of this. Their growing use has created concerns around imported products, safety certifications, charging practices, and facility fire protection. Identifying these hazards early allows controls to be implemented before larger losses can occur.

[10:29] Ultimately risk mitigation helps customers prepare for what may come next. Customers that demonstrate proactive controls, continuous improvement, and resilience planning are better positioned in the underwriting conversation and better able to support transparent dialogue amongst brokers, insurers, and risk engineering teams.

[10:50] Paul Lucas: If you don't mind as well, Everett, just tell me how those CAT-exposed regions or sectors change the risk conversation between the broker and the underwriter. And indeed, what should brokers be doing earlier in the process to perhaps help their clients understand and prepare for that risk?

[11:05] Guest: Yeah, of course. CAT-exposed regions change the risk conversation by extending the focus beyond the individual account to its specific location, applicable vulnerabilities, and the concentration of values.

[11:20] Since the exposure can't be avoided, the key question is how well the property is protected and how well prepared the business is for severe CAT events.

[11:30] Brokers can add value by gathering accurate information about the property, existing protections, and business continuity plans. Helping clients understand the natural hazards that are unique to their specific location.

[11:43] That alone gives underwriting a stronger initial picture and allows their risk engineering team partners to assess things such as water damage protection in flood and storm surge zones, vegetation and combustible storage practices in areas susceptible to wildfire, roof condition and other building maintenance practices in wind and hail-prone regions.

[12:05] As well as response and recovery plans if the site were damaged, inaccessible, or without power following a CAT event.

[12:13] When this information is shared early and kept current through clear, ongoing communication between the broker, underwriter, and their risk engineering team, it provides a clear picture of the exposure and helps distinguish between a business that is simply CAT exposed and one that is actively managing that CAT risk.

[12:36] Paul Lucas: Of course, Oscar, these accounts hold a much broader renewal timeline as well, don't they?

[12:42] Guest: Absolutely. Even for CAT-exposed accounts today, they absolutely hold a much broader renewal timeline. Time and time again, we found that the traditional 90 days out leaves very little room to educate the client, have meaningful conversations with their insurer partners, or even restructure the policy.

[13:05] Additionally, client advocacy is paramount. At HUB, we aspire to manage clients through multiple touch points throughout their policy term. One way we do so is through the engagement of our risk management services team.

[13:18] Sharing CAT modeling outputs in client meetings well before renewal conversations shifts the conversation from an intent to purchase insurance to really being about risk management and organizational planning for our clients.

[13:33] Our advisors are huge on transparency to our insurer partners as well. Being open about the negatives helps us build credibility for the client themselves.

[13:43] Showing our insurer partners that we're managing the risk just as much as they are through surfacing the loss history or through completely outlining CAT exposures ahead of any surprises is truly helpful in securing their best terms and meaningful capacity for our clients.

[14:04] While all this is happening, we're also constantly looking at all sorts of capacity considerations. It's important that we're doing so while approaching the primary market so that from a client standpoint we're truly going to them with realistic options and avoiding that last-minute panic and uncertainty that comes with only looking at a one-pronged approach.

[14:26] Paul Lucas: Yeah, and I just have one final question to throw at all of you if you don't mind. Looking ahead, what evolving pressures, regulatory, climate-related, capacity-driven, do you think will reshape both the definition and the risk profile of hard-to-place over the next few years? And indeed, how should the broker and insurer relationship adapt according to that? So, Scott, I'll start with you.

[14:51] Guest: Sure. I think one of the common themes of this conversation has been climate-related pressure and the pressure it puts on CAT events. I think that's one of the factors that will continue to shape the broker-insurer relationship.

[15:06] The key there is focusing on sophisticated modeling, closer attention to accumulations, and the broker's understanding of the challenges that insurers face. A stronger focus on adaptation and risk management of the client will influence how insurers assess the risk and ultimately come up with solutions for the broker.

[15:27] Regulatory activity also has a focus on how insurers understand, monitor, and manage climate-related risk, which puts more pressure on capacity for these types of risks.

[15:39] At the same time, complex value chains, interconnected operations, and cyber exposures are all creating new risk profiles that may not fit traditional underwriting approaches. Brokers and insurers need to work together to find solutions for those.

[15:58] Paul Lucas: Okay. Well, that's an insurer perspective. Let's get the broker perspective now, Oscar.

[16:02] Guest: Certainly. As Scott mentioned, there are a lot of factors that are evolving the pressures that will reshape hard-to-place risks. He mentioned regulatory pressures, macroeconomic factors, and continuing climate concerns.

[16:22] On the broker side, our role has undergone an evolution from a placement intermediary to a true risk advisory basis. At HUB, our advisors encourage year-round engagement with our clients and not just at that one time 90 days before renewal.

[16:39] We engage and support our clients to invest in better risk data and better risk management, which differentiates themselves greatly from their competitors. Our advisors play an integral role in helping build that data, build that story, and add lasting value for our insured partners so that they know that we're in it for the long haul.

[17:00] The current cycle is a strategic window to us. It's our ability to expand coverage, secure higher limits, migrate clients to more suitable coverage options, and ensure we're building resilience for them when conditions tighten.

[17:14] At the same time, the continued emphasis on transparency is hugely important to us. We need to be very transparent with our market partners on any changing appetite that they might have. Flexibility on their part and any nimbleness to address our client exposures goes a long way to show willingness to work together to make it right for our mutual clients.

[17:40] If you remember, we work in a very cyclical business. At the last hard market, we felt that there was a withdrawal of appetite relatively quicker than what public signals suggested. Today's capacity doesn't need to evaporate. We want to work with our market partners to find amicable solutions both for our clients' current term and long-term sustainability.

[18:00] Paul Lucas: Sounds like, just judging from the answers we've had so far, Everett, that in general perhaps the relationship should just become a little bit more transparent, would you say?

[18:08] Guest: Yeah, exactly. Transparent, collaborative, and data-driven as well. Brokers, underwriters, and risk engineering teams should continue to work together to share current information, identify material operational changes, and develop practical solutions that can help clients manage their evolving exposures.

[18:31] This helps keep the conversation more constructive rather than simply transactional. The last point I'll make is that collaboration also depends on clients taking an active role in the process as well.

[18:44] Businesses that understand how their risks are changing, keep their controls current, and clearly communicate planned improvements will be better positioned to build long-term resilience for their business.

[18:55] In turn, that transparency helps us as insurers assess the account more effectively and support constructive conversations about capacity, terms, and coverage options.

[19:08] Paul Lucas: Great thoughts and a panel indeed. Scott, Everett, Asker, huge thanks for your time. Thanks of course to Echelon Insurance for putting this discussion together. Remember, for more insights from the industry's finest, keep it right here at Insurance Business TV.

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