As we take stock of the recent year and strategize for the next, we make a list of market predictions that could affect our business and our clients. To seed discussions in the new year, here is a shortlist of our more salient predictions.
The Next Great Resignation: A hiring spree (to keep up with the investment in renewable energy assets) and a shortage of renewable energy expertise will fuel another avalanche of resignations as qualified (or not) personnel command jumps in compensation. Expect more people to switch from underwriting to broking (and vice-versa). Digital communication fatigue is another contributing factor – those spending less time in face-to-face trading are likely to feel most disconnected and most likely to leave. As a partner-owned business we incentivize our senior team to commit to the long-term, providing stability to our clients. While a core attribute of our company is our desire and willingness to spend time with clients in-person to understand their needs.
More M&A across specialist insurers and intermediaries: We expect to see larger players looking to buy-in more data and a team of experts in growing, niche classes of business. The uptick will be driven by an easing in interest rates (and the cost of capital), the proliferation of technical underwriting and a drive to secure ‘Insurtech’ solutions with lower operating expenses. It will be a disruptive period for insureds and reinsurers as acquired companies focus on integration while service levels drift.
Little uptake of AI in big ticket insurance: As the economy and AI entwine, we expect little impact on insuring large renewables and infrastructure, for now. Multi-hundred million dollar assets are bespoke – in location, technology and suppliers, while insurer in-house data collection is either too primitive and claims data too specific to draw statistically significant trends. But, slowly, across the industry this is changing. And we are at the forefront with our data-driven underwriting solutions.
Scrutinized Limits: Insureds, via brokers and lenders’ insurance advisors, are increasingly challenging limits in the face of higher economic inflation, claims inflation and macro-economics. For example, casualty limits have barely moved in five years, despite the jump in inflation. There is a disconnect in what insurers would like to see for natural catastrophe limits and what lenders require. Commercial underwriters grasp the concept and work with us to facilitate a solution, while those setting arbitrarily low limits are left behind. Continuing a recent trend, expect business interruption and delay in start-up values to fluctuate through 2024 as gas markets price in the risk of a widening war in the Middle-East and this passes through to higher power prices. For insureds, all this means greater pressure on your broker. It’s where long-term relationships and creativity in designing a structure that satisfies insurers and lenders matter.
An Assortment of Clean Tech: We expect to see newer technologies reach pre-commercial and commercial-scale projects, including: Carbon capture, floating solar and new battery-storage technologies. While those on the periphery are brought in from the cold: Nuclear, biomass and tidal energy. Given planning and grid backlogs and continued higher power prices, we expect to see more repowering and life-extensions of wind projects. Structuring and negotiating deals on new and lower volume technologies requires technical expertise to explain risks to underwriters. Our team has already placed many of these technologies at the prototypical stage and now have the track-record to structure the first commercial projects.
A Shackled Supply Chain: Gone are Covid related fractures, now expect policy-driven cracks. As governments move to non-price criteria in tenders and auctions for new renewable energy projects, it means more local content and, ironically, a riskier supply chain as it matures. This dynamic will be stretched by over 70 elections in 2024, with job creation likely to be on the agenda at most. We have claims experience of how new supply chains go wrong and can guide insureds through the process of apportioning risks in contracts, particularly around defects in manufacturing and delays.