Contributory factors that have led to the current hard market conditions

Authored by Q Underwriting

There have been more drastic and rapid changes impacting the UK property sector in the last three years than has been seen in the last 30. Read on as Tony Matthias from our Property division gives his view on the challenges we’re facing and the contributory factors that have led to the current hard market conditions.

Brexit

Leaving the EU continues to have an impact with reported shortages of skilled workers and drivers, leading to more temporary workers who lack the skills necessary to do the work. Unfortunately, this has led to an increase in claims for manual handling injuries, due to high staff turnover and staff having to work longer shifts.Trading conditions have become more challenging and the future remains unclear.

Ukraine war

There has been a significant knock-on effect to the economy since the start of the war, with worldwide supply chains still unsteady from the Coronavirus pandemic. The war has been instrumental in the rising costs across Europe and the UK.

Property and the insurance market

The UK’s weakening economic picture, coupled with increased borrowing costs and stubbornly high inflation, is putting pressure on mortgage repayments. This, in turn, is impacting the rental sector, leaving the U.K teetering on the edge of a property crash in 2023, despite remaining resilient during the pandemic. Claims inflation has increased, with a shortage of labour and materials causing delays and more expensive construction costs. Despite this, the UK construction sector was the most buoyant in the last year.

The property insurance market in the UK has seen a reduction in market appetite and capacity, due to rate increases across the sector. This includes withdrawals from MGAs and insurers pulling out of the residential sector, as well as less appetite in the non-standard sector. While the lower-end residential-let sector has been particularly impacted, with escape of water claims prevalent and resulting in widespread losses.

In the last 12 months we have seen property index linking double digit increases, with some over 20%, but with a large proportion of the UK housing stock remaining under-insured. The rental sector has increased from a proportion of 12% to over 20% in the last 10 years. First time buyers are being priced out of the market, but overseas investment remains successful.

Asylum Seekers

With the increasing number of immigrants seeking asylum in the UK (see figure 1) there has been a rise in asylum seeker properties that have been leased to the Home Office, which require insurance and careful underwriting.

Whilst the trading outlook remains challenging and the hard markets seems set to continue at least until the end of 2023, this can change quickly, and road ahead remains uncertain.

Our Property division, specialising in the non-standard sector, and backed by A rated capacity, is on hand to help. For more information on our offering, or if you have any queries relating to the above, CLICK HERE, leave a message and youTalk-insurance will pass your enquiry on.