Insurers value proposition and quality of service will be critical factors in an increasingly competitive market, according to Adias Gerbaud, AXA XL’s Chief Underwriting Officer (CUO) for APAC & Europe
Conditions in the property and casualty market have moved on since last year’s Ferma Forum event in Madrid. Over the course of this year, the market has become increasingly competitive for our European clients, with many now enjoying improved terms and conditions at renewals.
In almost all lines of business we are seeing pricing come under pressure, driven by record levels of industry capital and healthy competition, and especially for property risks and financial lines like cyber and directors and officers. Non-U.S. exposed casualty risks in Europe are also experiencing increased competition, leading to flat or even some reductions in pricing at renewals.
There are, however, some notable exceptions to this softening trend. U.S. casualty continues to suffer from adverse litigation trends while storms, floods and wildfires remain a big source of volatility for property, with global insured natural catastrophe losses already in excess of $100 billion in the first half of 2025. Meanwhile in cyber, ransomware attacks continue to cause significant business interruption losses for European companies, as well as threaten both IT and physical supply chains.
Best defense
The volatility in U.S. casualty losses is of particular concern. Social inflation continues to outpace economic inflation as litigation funding and societal changes are fueling outsized verdicts and settlements in the U.S. Last year saw a 52% increase in the number of corporate lawsuits resulting in a nuclear verdict (exceeding $10 million), with awards totaling a staggering $31.3 billion, a 116% increase over 2023, according to Marathon Strategies. Forty-nine of those awards were ‘thermonuclear’ (exceeding $100 million) and five were greater than $1 billion.
In order to manage exposure to nuclear and thermonuclear verdicts, insurers have reduced capacity and limits for international programs with significant U.S. exposures. Yet the industry continues to see large claims. According to ratings agency AM Best, the U.S. commercial auto insurance industry has posted a $10 billion underwriting loss over the past two years.
Tort reform would go some way to addressing social inflation, although progress on this front has been patchy: bills characterized as tort reform have been passed by Florida and Georgia, although a similar bill was recently rejected by the legislature in Texas. Crucially, clients, insurers and defense attorneys can work together to counter aggressive plaintiff attorney tactics and avoid outsized verdicts and baseless/vexatious claims. We encourage our clients to engage early and work closely with our claims teams, who have the local knowledge and experience needed to prepare the best defense possible for a given jurisdiction and type claim.
Focus on service delivery
U.S. casualty aside, the insurance market is looking increasingly favorable for large corporates and mid-market companies. And with increased competition comes greater emphasis on insurers service delivery and value proposition. While price is always important, customers will also select their insurance partners based on the speed and quality of service and response, the breadth of solutions they offer, and the additional value they can bring to their clients.
I believe that more competitive conditions will accelerate improvements in service delivery in our industry, as well as drive greater efficiency. Standing still is no longer an option. All business in the current economic climate are challenged to manage costs and raise service levels, and commercial insurance is no exception. Longer term, the application of technology to deliver best in class service more efficiently will become a competitive advantage – insurers that fail to deliver on this front are unlikely to survive.
Beyond transactional
Increasingly, the complex risks our clients face require solutions that do not suit a purely transactional approach. Challenging exposures, such as climate risks, transition technologies or cyber, demand higher levels of collaboration, expertise and risk analysis. They often also require additional risk management and loss prevention services, such as risk mapping, threat intelligence and training: AXA’s Digital Commercial Platform, for example, uses cutting edge technologies to provide clients with a single platform to help anticipate and manage their risks.
For multinational companies, it is also important to partner with an insurer than can deliver insurance and captive solutions and services globally, including for emerging areas like digital risks and transition technologies. To this end, we recently launched a new multinational solutions client portal, which enables clients to analyze and extract data and documents in real-time. The considerable expertise and capabilities required to deliver robust compliant multinational solutions is to my mind under-appreciated.
Outlook
Despite some big sources of uncertainty and volatility in the world, the insurance market continues to provide valuable risk transfer solutions for challenging areas of risk, including natural catastrophes and U.S. casualty. And if predictions of a buyer’s market for reinsurance made at this year’s Monte Carlo Rendez Vous are realized, corporate insurance buyers can expect positive market conditions for the foreseeable future.
This does not, however, mean a rerun the rollercoaster ride of previous cycles. I would argue that we are in a different place today. We have better data, analytics and insights, and we have learnt from previous cycles. I also believe that we are in a very different place in terms of risk – stability and collaboration should be the antidote to an increasingly unpredictable and volatile risk environment.
