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If the past two years have taught us anything, it’s the value of preparing for the unexpected. Those who are able to be flexible and meet changing market conditions have a greater chance of success in times of stress and change. So, with that in mind…

What do we see looking ahead towards 2022? 

There is some capacity out there, meaning some investors have seen an opportunity to make a quick profit from rate increases. A couple of caveats, however: That capacity is going towards the best accounts, as it usually does at first, and we are also seeing capacity drop off as quickly as it’s being added. 

There are insurance companies that are looking at portfolios of business and deciding they can’t raise rates fast enough, and so they simply won’t write that business anymore. 

Furthermore, consider insurance lines with a higher barrier to entry, as opposed to lines like excess liability, which are easier to jump into — especially if you do it on an excess and surplus basis, in which case you wouldn’t have to file forms or rates with the states. Other primary lines of business, on the other hand, require more infrastructure. These types of lines, such as cyber liability, require sophisticated underwriting and partners to help mitigate losses and negotiate with perpetrators, so they have to be a bit more measured. 

Right now, insurance companies are seeing that everybody’s losing money in this arena, and so there are not a lot of people who are eager to come in. Of course, there are some who think they’ve built a better mousetrap, and they can underwrite it more efficiently, or pick better risks. But at the end of the day, there are still a lot of cyber criminals  out there that are making money doing this. 

How will the pandemic impact the insurance marketplace in 2022?

As we survey the business landscape from the end of 2021, we see various levels of preparedness, and different types of workforces who are willing to engage in different ways. Here in the Northeast, we are seeing many people who remain very concerned about going into the office, while others are more comfortable doing so. The news surrounding the surge of the Omicron variant just adds more uncertainty to this topic, at least when looking towards the first quarter. 

So what’s the bottom line? The modern company needs to be able to conduct business virtually if possible. Of course, there are those who aren’t able to do so, but every company must make an effort to protect their workforce. What those efforts look like procedurally may vary depending on the risk of Covid-19 at a given time, and unfortunately as insurance brokers we don’t have a crystal ball (if we did, our jobs would be much easier!). 

One thing we can say with near certainty at this point is that companies that don’t have any kind of planning for pandemic worst case scenarios will likely run into scenarios that adversely affect business and profitability in 2022.

Predicting what will happen in the coming year for the insurance market is like predicting the weather; you can track conditions, patterns, and data, and make educated guesses based on your expertise, but it’s an inexact science in the best of times. In times such as these, when unpredictability and uncertainty seem so prevalent, it is more important than ever to make sure you are working with trusted partners and advisors who can help you weather the storm.

Foa & Son’s team of experts stands ready to provide flexible guidance in a changing world. Reach out here to connect.