The Tentacle

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The Hardening Market

Due to a series of events in recent years, the Insurance Market is seeing a reduction in capacity and insurers becoming increasingly more stringent about the risks they are willing to cover.

The market is primarily influenced by two main factors, the weather and the economy. With the last few years being a turbulent time for both of these, alongside some other unexpected factors, the market has seen a significant shift.

Below we have laid out the main reasons the market has hardened and the effects they have had, all of which combine to create the insurance market we see today.

Solvency II

In 2016 the EU introduced Solvency II. This is the number of surplus assets an insurer has, that must be held over their liabilities.

If an insurer falls below Solvency II they must have a regulator agreed plan in place to show their solvency is adequate for ‘worst-case scenarios’. Staying below Solvency II for an extended period increases the insurers’ risk of bankruptcy.

Solvency II has removed a lot of insurers spare capital meaning an insurer must, therefore, hold far more capital than previously to allow them to write the same amount of premium and is proving to be a significant barrier for new insurers to be established.

This factor has also led to the increase of MGA’s that we’ve seen in recent years.

Ogden Rate Changes

In 2017, the Ogden Table changed, with rates shifting from 2.5% to -0.75%, causing insurers to be yet more cautious and considered with the risks they place and adhering to more stringent standards.

The higher the rate, the better for the insurer and the lower the rate, the better for the customer. Lower rates mean higher payments in the event of a claim.

With claims payments expected to be higher, insurers need more capital to retain their solvency margin and remain in Solvency II, as explained above.

The rate currently sits at -0.25% in England and -0.75% in Scotland, with a review due by the government in 5 years.

Grenfell Tower

Following the Grenfell Tower fire in 2017, the construction industry has been hit with massively increased Design and Construct PI premiums. The market has seen a reduction in capacity for those involved in cladding, as well as other areas of heavy construction, with some insurers withdrawing from the market completely.


As you will no doubt remember, the start of 2020 saw particularly bad weather, with both storm Dennis and Ciara wreaking havoc and costing insurance companies hundreds of millions in claims, due to the particularly low rates mentioned above.

The estimated cost for these losses is about £425million - another huge, relatively unanticipated hit to the industry.

The storms have also meant that the Property book is not as able to prop up the liability book that has been hit with the Ogden Rate change.


Whilst we are still living through this Covid-19, its effect and likely further effects on the industry are undeniable, yet at present still relatively unknown.

We could see BI losses due to COVID run into billions, draining the re-insurance market significantly and therefore, likely to cause premiums to rise drastically.

Investment Rates

Investment rates are now at an all-time low. The Commercial Property Market is reducing. Both of these changes mean insurer investments will be affected, potentially lowering their assets and in turn their solvency margin, again affecting capacity.

Changing Strategies

Many of the major insurers are having to change their strategies, looking to partners for wealth and cash piles. Others have been forced to pull cover completely and in the worst scenarios, insurers are disappearing entirely. All of this is attributed to solvency requirements becoming harder to meet and maintain, in turn lowering competitiveness within the industry.

What covers are under threat?

Whilst the entire market will see a shift, some covers are likely to be harder hit than others. Motor Trade and Haulage Fleets lose most insurers money due to their high claims, therefore, lowering their solvency margins. These risks will, therefore, be less desirable to insurers.

What do we do now?

Whilst the culmination of the above has led to a hardening market, making risks harder to place in a less competitive environment, we are dedicated to maintaining our insurer relationships and proactively placing risks with insurers in a great capital position.

As a broker, there are a few key things to keep in mind when interacting with your customers over the coming months. You can read more about the best ways to trade in a hard market here.

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Site map coming fairly soon... the New Year probably.

The site map will be an aid to navigation around our various websites. Of course, these sites have just undergone a major structural update and things are still changing.

So, it’s a bit like when a supermarket periodically shifts things around, either, just for the hell of it, or, because they have decided to squeeze in a click & collect point, where the bread used to be.

As stuff relocates, consequently, leaving the signs above the ends of the aisles as they were before, could become confusing.

Our current situation here is very similar.

Mind you, whether before or after the reorganisation, you can never find the Tahini paste. You always have to ask.