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2019 Insurance Market Update & Trends A Look Beyond the Data - The Broker’s View

Get insights into the latest trends and updates in the insurance market. Explore market cycles, health insurance, life insurance, property & casualty market, and more. Understand the drivers and key indicators shaping the current insurance landscape.

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2019 Insurance Market Update & Trends A Look Beyond the Data - The Broker’s View

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  1. 2019 Insurance Market Update & TrendsA Look Beyond the Data - The Broker’s View • June 6 2019

  2. Insurance Market Cycles – “27 Years of Naïve Perspective and Bliss” • Health Insurance Market • Inelastic Demand Curve / Flat Supply Curve • Not Sustainable . . . Perpetually Hard Market Life Insurance Market • Superior Market – Robust Statistical Data • Mortality Tables / Analytics = Near Perfect Info. • Property & Casualty Market • Well-Functioning Supply and Demand Curves • One True Hard Market in Past 27 Years – post 9/11 • Why Cycles in P&C? • Don’t Know Costs of Goods Sold; Difficult to Price • What We Do Know . . . Change is Definitely Here

  3. Insurance Market Drivers – “3 Cs & a D” • CAT Losses • Weather Related and Human Caused Cost of Reinsurance • Treaties Impact Costs to End User - Insured • Capacity • Supply, supply, supply • Demand • GDP Growth Drives Demand

  4. Current Insurance Market Trends • Key Trends and Leading Indicators • Excess Market Capacity and Record Surplus $741B • Industry Now Has $1 Surplus for $.077 of NPW • Demand Growing with Growth in Economy • Carrier Profitability Remains Strong CAT Update • 2017 and 2018 – 15 Costliest Catastrophes -$140B+ Insurable Losses • Changes in Loss Frequency and Severity • Both Frequency and Severity Increasing • Storm Clouds on the Horizon

  5. Economic Growth Drives P&C Insurance Industry Premiums

  6. Policyholder Surplus, Quarterly 2007:Q3 – 2018:Q4

  7. Global Insured Catastrophe Losses: 2000 – 2018

  8. US Composite Pricing Increases – Q1 2019[Source - MARSH] • Overall US Pricing in Q1 2019 • Increased 1.1% [Global Pricing Up 3%+] US Property • Rates Increased 4% • Increased Each Quarter Since Q4 2017 • US Casualty • Pricing Declined 1.7% • Has Decreased in All But One Quarter Since 2014 • US Financial and Professional Lines • Increased 2.8%, Driven by D&O • 77% Insureds Experienced Increase • Highest % in Several Years

  9. Musings on Combined Ratios • A Beautiful Run . . . At Least While It Lasted • 2013, 1014, 2015 • Only Time in History That Has Happened Impact • Carriers Started Taking Down Reserves • Dumb Capital in Industry = Suppressing Pricing • The “Cheating Phase” • 2019 Outlook • GL [105%], Auto [108%], Prop [140%] WC [100%] • Surplus Levels will Change • Carriers - Lousy At Pricing for Catastrophes • Rates Will Go Up Even More in Q3 and Q4

  10. P/C Insurance Industry Combined Ratio 2000- 2018

  11. Selected Indicators of Changes in Loss Severity

  12. Deeper Dive Into Market Conditions - D&O and EPL • Directors & Officers Liability • Public Company – Hard to Deteriorating Rapidly -IPO: Cyan Ruling, ‘33 Act Exposure [Section II] -Filing Company: ‘34 Act Exposure -Rates / Retentions • Private Company -Larger Risks Pushed to Public Co. Forms Employment Practices Liability • #MeToo • Manage Risk by Retention

  13. IPO Pricing Trends Pricing & retentions for IPO D&O Coverage has shown an increase over the past several years, particularly after the Cyan verdict in March 2018 • Considerations • Industry vertical • Amount raised • Projected MC • Pricing methodology • Path to profitability • Selling shareholders • Secondary plans • Carrier selection • Program structure • Self-insured retention

  14. Traditional Securities Class Action Filings Affect Up to 4.5% of Companies Per Year

  15. Deeper Dive Into Market Conditions – Cyber • Rapidly Changing Market . . . Getting Better • 10 Year Evolution -Wild West to Improved Forms -Capacity and Demand Drives Everything • Capacity is Plentiful -6 carriers to 100+, even WCF True Value Proposition of Cyber • Cyber Arms Race - Pre and Post Breach Resources -Data Incident / Breach Coach • Taking a Page Out of Workers’ Comp Playbook

  16. Emerging Risks • Electromagnetic radiation (5G) • Climate Change • Antibiotic resistance • Selective serotonin reuptake inhibitors • Phthalates (endocrine disruptor) • GMO’s (including gene-edited embryos) • Blockchain • Glyphosate • PFAs • Machine learning assisted • social engineering • Microplastics • Personal data ownership • Personal devices that monitor health • Genetic data • CTE • Lithium ion battery • Non-affirmative cyber • Sexual harassment, abuse and molestation • Wildfire • Marijuana • E-cigarettes • Opioids • Cryptocurrency

  17. The Takeaways • Renewal Strategy and Planning • Start the Process Early • Leave No Stone Unturned [Need all Carrires] 2019 Cost of Risk Transfer Budget • Increase It . . . A Lot • Public D&O – Build In 25%+ • The “Renewal Emotional Spectrum” • Denial • Anger • Acceptance • Appreciation

  18. Contact Me @ Spence Hoole ,President, CEO Diversified Insurance Group shoole@diversifiedinsurance.com 801-325-5050 www.diversifiedinsurance.com

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