Hard Insurance Market: Spotlight on Asset Value Declarations

May 11, 2023

The global insurance market has recently entered a hardening phase, marked by reduced capacity, increased premium rates, and stricter underwriting criteria. This challenging environment has shifted the spotlight onto asset value declarations from underwriters and reinsurers. Accurate valuations have become crucial in maintaining the sustainability and stability of the insurance industry. In this article, we will explore the implications of the hardening insurance market, the importance of asset value declarations, and their impact on underwriters and reinsurers.

The hardening insurance market

The hardening of the global insurance market is characterised by several factors, including increased claim frequency and severity, natural catastrophes, economic uncertainties and tighter regulatory requirements. These factors have led to reduced capacity and increased risk aversion among insurers. Consequently, policyholders are now experiencing higher premium rates, stricter underwriting guidelines and more limited coverage options.
The hard market has put immense pressure on underwriters and reinsurers to carefully evaluate the risks they accept, as their margins for error have significantly decreased. In this context, the accuracy and transparency of asset value declarations have become more critical than ever.

The importance of asset value declarations

Asset value declarations are essential for insurers to accurately price and underwrite policies. Underwriters assess the risks associated with insuring specific assets and set premium rates accordingly. Reinsurers then provide coverage to insurers, allowing them to spread their risks and reduce potential losses. Both underwriters and reinsurers rely on accurate asset value declarations to make informed decisions and maintain the industry’s stability.

Inaccurate or outdated asset value declarations can have severe consequences for all parties involved. Underwriters may underestimate risks, leading to inadequate premium pricing and potential losses. Reinsurers may also face significant losses due to insufficient coverage limits. Furthermore, policyholders may find themselves underinsured or even uninsured when a loss occurs, resulting in financial hardship.

The spotlight on asset value declarations

The hardening insurance market has amplified the importance of accurate asset value declarations. With increased scrutiny from regulators and heightened risk awareness among insurers, underwriters and reinsurers, ensuring the accuracy of asset values has become a top priority.

Several factors are contributing to this renewed focus:

  • Regulatory Pressure: Regulatory authorities worldwide are intensifying their efforts to maintain the stability and solvency of the insurance industry. Accurate asset value declarations are vital to achieving this goal. Consequently, regulators are increasingly monitoring and enforcing compliance with valuation standards, leading to heightened scrutiny of insurers’ underwriting practices.
  • Risk Management: The hard market has underscored the need for insurers to manage their risks effectively. Accurate asset value declarations are essential in this endeavor, as they enable insurers to assess their exposure accurately and establish appropriate coverage limits. In turn, this helps insurers maintain their financial stability and solvency in the face of increased claims and market volatility.
  • Asset Values and the consequences of averaging: The hard market has heightened the importance of declared asset values in the insurance industry. Insurers are becoming persistent that declared values should be reviewed and the need for independent professionally qualified valuer to complete this work. This has and is becoming much more of an issue when a partial loss occurs and asset values will be tested. We have been hearing that some global underwriters and reinsurers are not offering renewal terms unless independent insurance valuations have been completed by professional valuers who are experienced in insurance valuations . Conversely, clients or the insured with a history of inaccurate declared asset values will struggle to retain existing underwriters and reinsurers unless independent insurance valuations have been undertaken.

Don’t hesitate to contact Asset Valuation Advisory for expert guidance on navigating the hard insurance market and ensuring accurate asset value declarations. Our experienced team is here to help you make informed decisions.