The Netherlands Q3 Market Dynamics
Landscape
A third wave of COVID-10 infections in the first half of 2021 was followed by a spike up to a seven-day average of over 10,000 new cases per day in July as the Delta variant hit the Netherlands. Consequently, measures limiting public indoor gatherings, which had been relaxed at the end of June, were brought back.
Despite this impact, economic growth outperformed earlier expectations. Statistics Netherlands estimates GDP growth of 3.8% in the second quarter, driven primarily by household consumption and a higher trade balance, and the government predicts total growth in 2021 of 3.9%, marking a recovery after a 3.8% drop in 2020. Meanwhile, inflation as measured by the Consumer Price Index hit 2.4% year-on-year in August.
In the general election in March the VVD party won the largest vote share for the fourth consecutive time, and incumbent Prime Minister Mark Rutte retained his position at least for the duration of coalition negotiations which as of October were still ongoing.
Key Indices - The Netherlands
Market Dynamics
The Netherlands Featured Products Q3 2021
Q3 Automobile Summary
Overall (Stable) Partly as a result of favourable loss performance during COVID-19, the market is stabilizing and conditions are slowly improving.
Rates (Flat) Rate increases are modest, and driven by inflation correction.
Capacity (Ample) Capacity is sufficient; however, merger activity has reduced market capacity overall.
Underwriting (Prudent) Underwriting is, in large part, controlled by central underwriting teams, resulting in less flexibility and longer negotiations, especially on large and/or non-standard risks. There is limited appetite for large fleets, passenger transport, rental business and couriers.
Limits (Stable) Limits remain stable with the exception of unique risks such as hazardous substances, where reductions may be imposed.
Deductibles (Stable) While insureds are exploring deductible increases, very few are opting to implement them as the resulting premium reduction is deemed not sufficient.
Coverages (Stable) Coverages remain stable. There are very few COVID-19 related discussions or proposed policy amendments.
A Look Ahead (Stable) Current market trends are expected to continue. A greater focus is expected on improving the underwriting of individual risks with poor technical performance.
Q3 Casualty/Liability Summary
Overall (Challenging) The Casualty market continues to evolve, with insurers looking to drive rate increases and continuing to focus on coverage clarifications. In the claims arena, insurers are increasingly relying on external claims handling services for claims management, due to lack of internal resources, which further complicates negotiations around claims settlements.
Rates (+11-30%) Rates are increasing significantly.
Capacity (Constrained) Although capacity remains sufficient overall, insurers are implementing capacity management strategies, particularly on certain risk types.
Underwriting (Stringent) The underwriting function continues to centralize, and local underwriters have limited flexibility. Robust underwriting information is increasingly important as more risks are required to be submitted for central approval.
Limits (Decreasing) Limits are decreasing due to capacity management strategies, resulting in more excess layers and participants on programs. Deductibles (Increasing) Minimum deductibles are applying to insureds without losses while deductible increases are required for loss-active risks.
Coverages (Restricting) Covid-19 and Cyber exclusions continue to be introduced, and Silica exclusions have become a topic of discussion.
A Look Ahead (Challenging) Current market conditions are expected to continue, with a continued tightening of coverages – the extent of which will vary largely by industry and risk performance.
Q3 Cyber Summary
Overall (Challenging) Poor performance and insurer uncertainty – driven mostly by ransomware losses - have led to significant rate increases and ransomware coverage restrictions. Insurers are focused on risk quality and cyber preparedness, and the underwriting environment is stringent.
Rates (>+30%) As capacity contracts further and losses increase in frequency and severity, rates are continuing to climb significantly.
Capacity (Constrained) Appetite is contracting and capacity continues to decrease, especially for new business.
Underwriting (Stringent) Insurers have become more technical in their underwriting approaches. Extensive, detailed underwriting information is required. There is widespread awareness of losses that have affected industries like logistics, energy, healthcare and lawyers, making it challenging to find coverage for these risk types.
Limits (Decreasing) Insurers are introducing sub-limits and/or coinsurance for ransomware, especially on excess layers. To limit their exposure, insurers are imposing a restriction on the amount they will write on any one risk.
Deductibles (Increasing) Significant deductible increases are being imposed across-the-board.
Coverages (Restricting) Ransomware coverage is restricted and sub-limits apply. Where risk information is insufficient/incomplete, coverage may be excluded or, in same cases, a Cyber policy will not be offered.
A Look Ahead (Challenging) Current market conditions are expected to continue. Underwriting is expected to become even more rigorous – with additional questions being asked related to controls and risk management, especially focused on changes made following any loss. Regulators are looking carefully at the insurability of ransomware.
Q3 Directors & Officers Summary
Overall (Challenging) A gradual stabilization is emerging following a prolonged period of significant disruption. Rate increases continue but have decelerated notably. Centrally controlled underwriting is proving less flexible than local underwriting.
Rates (+11-30%) While pricing increases continue - driven by the still-developing loss trends, litigious environment, and lack of available capacity - they are starting to moderate.
Capacity (Ample) Insurers continue to leverage capacity management strategies, especially for certain poor performing industries. At the same time, some new capacity has entered the market (although there is still limited appetite and capacity for Financial Institutions).
Underwriting (Prudent) Local underwriters are required to adhere to central underwriting strategies and guidelines, with limited flexibility.
Limits (Stable) Insureds are evaluating limits; as pricing increases some are considering reductions although few are actually decreasing their limits.
Deductibles (Increasing) Deductibles for members of the Board are generally stable while company deductibles continue to be scrutinized and increased.
Coverages (Stable) While coverage is generally stable, Silent Cyber continues to be a topic of discussion.
A Look Ahead (Stable) Market conditions are expected to continue to moderate as capacity expands and price equilibrium is reached.
Q3 Property Summary
Overall (Challenging) Centralized underwriting is having an impact on the Property market in the Netherlands, making pricing, coverage and capacity, especially related to Natural Catastrophe exposure and Contingent Business Interruption, more challenging.
Rates (+11-30%) A challenging price environment continues, although risks that experienced adjustments during recent renewals may experience more modest increases during the 2021 cycle. Challenging industries such as food & beverage and heavy industry & manufacturing risks continue to experience significant price increases.
Capacity (Ample) Capacity has contracted but remains generally sufficient. Capacity is constrained for larger placements and/or distressed risks.
Underwriting (Prudent) Underwriting has become more rigorous and conservative, even for incumbent relationships. Share of risk is coming under evaluation.
Limits (Stable) Expiring limits can be achieved in most cases, although some insurers are conducting reviews of limits and sub-limits, particularly for poor-performing classes.
Deductibles (Staple) As the market remains difficult, insureds continue to look for ways to manage the trade-off between price increases, coverage and capacity through the use of risk modelling to understand potential alternatives like using reinsurance and/or increased retentions via a cell or a captive.
Coverages (Stable) Coverage clarifications continue, particularly related to Communicable Disease, Cyber, or where insureds operate in certain industries such as Food & Beverage or Heavy Industry & Manufacturing. Insurers have increased their focus on insurance of PV panels. Further fine-tuning of COVID and Cyber clauses is ongoing.
A Look Ahead (Challenging) Price increases may moderate somewhat through the remainder of 2021 and into 2022; however, a focus on NatCat modelling and Contingent Business Interruption is expected to continue.
Q3 Trade Credit Summary
Overall (Stable) Largely as a result of government support, COVID-19 losses have not materialized as expected. Insurer loss ratios remain favorable, resulting in favorable insurance market conditions. However, government support schemes are ending, and there is uncertainty as to ultimate market impacts.
Rates (Flat) Having seen broad rate increases over the last 12 months, flat renewals have now become common.
Capacity (Ample) Industries that have been heavily impacted by COVID-19 may experience reduced capacity, while capacity is sufficient for most risks.
Underwriting (Prudent) Underwriting remains cautious in the face of continued uncertainty as to the ultimate impacts of COVID-19. Up-to-date financial data is crucial.
Limits (Stable) Limits are based upon recent client financial data. In general, sufficient limits are available for most risks.
Deductibles (Stable) Minimum deductibles are experiencing mandated increases for risks with losses while deductibles for loss-free risks remain stable.
Coverages (Stable) Coverages were not generally restricted during COVID-19, and underwriters remain liberal in offering broad cover.
A Look Ahead (Stable) Uncertainty related to financial performance, supply chain, and energy prices will continue in the near term and may impact underwriting practices and attitudes.