As CEO of the boutique Managing General Agent (MGA), Alta Signa, Gerard Van Loon has a birds-eye view of the challenges, opportunities and key trends that are sweeping the European insurance market as 2023 advances.

Since it began operations in 2019, Alta Signa has launched operations in Austria, Belgium, France, Germany, Italy, the Netherlands and Spain – specialising in management liability, professional indemnity, crime and cyber insurance for both client segments, commercial companies and financial institutions. In a recent interview with Insurance Business, Van Loon noted that the key challenge 2023 looks set to bring these lines of business is price stability.

“After a short period of improved market discipline, we are observing again an increase in the supply of specialty insurance capacity and an initial softening of risk pricing,” he said. “This latest market development is not coherent with the pan-European macro-economic trends of high inflation, to which long tail classes of business are particularly sensitive, and a possible hard landing of the economy (deep recession) with an increase in the number of insolvencies.”

The challenges posed by broad coverages 

Another challenge facing this space is the often broad coverages that are offered, he said, and the commiserate pricing difficulties that follow. The European-wide tacit renewal principle means that Alta Signa’s broker customers rarely advise their clients to cancel their policies, meaning that new carriers come on with full continuity of cover.

“We also often have to deal with silent, i.e., non-affirmative D&O coverages for pollution, product liability and cyber exposures,” he said. “Cover for corporate fines and penalties, in the event of a breach of the European anti-trust, anti-money laundering and anti-bribery legislations, is another grey area, as is cover for ball bonds.

“One could assume that the broad terms and conditions offered in some of the European markets may be reflective of a relatively benign claims’ environment or excessive market competition. We’re hopeful that a potential tightening of reinsurance capacity will be a key driver to recreate a degree of pricing discipline and coverage sustainability, and we are watching this trend closely.”

Van Loon shared that the key growth opportunity presented to Alta Signa’s core lines of business (professional and financial lines) remains cyber insurance. Existing customers are looking to purchase additional limits, he said, while the first-time buyers’ market is fast growing on the back of a number of high-profile ransomware cases.

What insurance offerings are in demand from financial services companies 

As to insurance offerings in demand from financial services companies, he noted due to their inherent exposure, financial services companies are all looking to buy cyber insurance protection. Insurers are not always able to meet this demand due to the systemic exposure, lack of reliable loss data, tight coverage and conservative risk pricing. In many ways, cyber insurance is still an emerging or immature market.

“Another challenging area for insurers is professional indemnity insurance for financial services companies,” he said, “in particular when those companies are dealing with consumer business and high-net-worth individuals. Regulation to protect consumers is quickly developing and the recent macroeconomic trends are making investment returns more volatile with an increased risk for breach of mandate.”

Key trends impacting the European market 

Some of the major trends that Van Loon is seeing impact the European market include the move by large global reinsurers to build their own in-house specialty insurance underwriting operations. This had led to a stronger fight for underwriting talent. Furthermore, he said, post-Brexit a number of international insurance companies decided to set up their own insurance companies within the EU operating on a freedom of services basis. It seems fair to say that there has been a meaningful inflow of new insurance capacity over the past few years.

“As far as specialty insurance is concerned,” he added, “technology is acting more as an enabler, allowing underwriters to improve their productivity, risk selection and pricing; rather than a disruptor, threatening the immediate future of existing specialty insurance carriers.”

Van Loon highlighted that the MGA’s role is to offer those international (re)insurance carriers who have no ambition or resources to build their own in-house European retail network, access to attractive domestic European retail business at a competitive operational cost. Using its local knowledge and expertise of markets across Europe, and local language skills, he said, the team creates a unique value proposition for those international (re)insurers.

“We offer our panel of risk carriers the opportunity to take insurance risk without having to incur the fixed operational expenses or investment risk,” he said, “and in turn we offer our broker customers access to A-rated insurance capacity that was not available to them locally beforehand.”

What’s next for Alta Signa?

As for the year ahead, he revealed that the firm’s major strategic focus is to continue to build its European local footprint and to improve its product offering for its broker customers. Alta Signa just announced its expansion into central and south-eastern Europe (CSEE), he said, an area where it sees growth opportunities in professional and financial lines and cyber that can benefit from local expertise on the ground. In line with this approach, it is continuing to explore other opportunities for strategic expansion elsewhere in Europe.

“I’m lucky to work with an inspiring and forward-thinking team, and look forward to further adding to this talented group of people as we expand as a business,” Van Loon said. “Along with our commercial growth, a key focus for us as a team in 2023 is to share our underwriting knowledge and experience with the market as we drive to improve underwriting performance and secure the right coverage for hard-to-place risks.”

Alta Signa Ltd. Is an Appointed Representative of Davies MGA Services Limited.

This article was written by Mia Wallace of Insurance Business Magazine and originally published on 9^th January 2023. It has been re-produced here with their kind permission.