Briefing: ‘Tis the season to be jolly?

By Mike Edgeley

I’m not sure I can remember such an eventful period in a long time.

Sure, we had the Covid-19 pandemic kicking off in 2020, the subsequent post-pandemic economy, the Ukraine ‘special military operation’ and the terrible conflict between Israel and Hamas, which started last year.

But it did seem that life was getting back to some sort of normality for Western economies – which, sadly, cannot be said for the long-suffering people of Ukraine and those affected by the conflict in Israel, Gaza and the West Bank.

Softening market settles in

The insurance sector has been doing its normal cycle of deciding it’s had enough of strong rate increases and has entered what many would call a softening market.

That’s not unusual. Many across the market would say that in 12 of the last 20 years, we have technically been in a softening market.

With inflation moderating, more available capacity and reinsurance costs creating less pressure, many product lines have slowed their rate of premium increase – with some exceptions like professional indemnity achieving significantly lower premiums.

Aside from that, other pressures seem to have eased too. Inflation has been reducing and the labour market seems to have settled down. There appears to be less of the crazy and seemingly panicked packages offered by some of the larger companies to fill vacancies as they restructured post-Covid.

We seemed to be returning to a period of greater predictability and certainty – a helpful development when planning budgets into next year.

Upheaval returns

And then – in the last few short months of 2024 – it has all gone quite mad again.

The government’s Autumn Budget was released in October 2024, which placed much of the pressure of filling its £22bn financial “black hole” on businesses, the well off and the energy sector, to name a few.

The employer national insurance (NI) increase will add more strain on firms and, in some cases, may be enough to push some into receivership.

The latest data from the government’s insolvency service showed that insolvencies were slightly down in October 2024 compared to the same month in 2023, but the rate is still much higher than during the Covid-19 pandemic and the period between 2014 and 2019.

Construction remains the worst hit sector here, with over 4,000 insolvencies in the year up to September 2024. This is in part due to that sector historically driving cost out through fixed price contracts, which are now uneconomical.

More recently, November’s US election ended with an unexpected landslide Trump victory, where Trump 2.0 has threatened to implement 20% tariffs on imports.

What’s more, the German government has collapsed, Russia has used an intermediate range ballistic missile on Ukraine and Britain, along with other parts of the world, have suffered severe weather events that have caused chaos.

Cyber threat

I’m sure The Clear Group is not alone in noticing an uptick in the level of cyber attacks too.

Some are the usual mass market phishing attacks, but we also recently experienced a brute force attack that attempted to extract password information.

Over a year ago, we upgraded our cyber security – at significant cost – to include a real-time security operations centre. We also updated our security information and event management capabilities. These changes certainly proved effective in combating this most recent attack.

There will be other companies that do not feel they have the resources to introduce that level of protection and, therefore, remain exposed to cyber threats.

This comes at a time when the government is warning that Russia could be ready to carry out cyber attacks on the UK, targeting British businesses and leaving millions without power.

It remains the role of brokers to explain to clients the value of cyber protection, despite penetration as a product remaining low.

Perspective

All of this uncertainty just reinforces the critical role the insurance profession plays in mitigating risk for our clients.

Just when we thought the UK economy was settling down again, understanding the risk exposure of our clients is more important than ever – especially if they are affected by any of the events I’ve just mentioned.

But while I was mulling over what this all means for UKGI, two other events happened recently that made me pause, as I was thinking about what needs doing before we go into the festive period.

First of those events was a call with my son, who mentioned that he had stopped to have a conversation with a young homeless person who was sleeping rough outside his university’s physics department.

He made the time to talk before taking a detour to pick up a hot drink and some food for him.

The second event was being invited by Richard Coleman, managing director at Ecclesiastical UK, to support a charity event sponsoring a homeless charity called The Passage. It was humbling to witness the impact the charity is having on the lives of so many people who have nowhere else to turn.

So, we enter the festive season and the world continues to go mad around us.

One thing we can all do this Christmas is make a small difference. I believe that we can often do this by helping those people immediately around us.

As the weather turns colder and wetter, many individuals – such as those sleeping rough – will not be as fortunate as we are.