The pandemic has led to a hardening of the insurance market, and even prior to the COVID-19 outbreak low interest rates restricted the profitability of insurers.

Additional cuts to interest rates across the developed world to boost economic recoveries have only added to these profitability pressures. Without significant price increases, the insurance industry is going to find it increasingly difficult to meet the growing need for insurance protection in a commercially viable way.

Furthermore, with the UK in a post-Brexit environment, the longer-term implications for the domestic insurance industry remain somewhat unclear. Key concerns include the potential for lower economic growth to dampen insurers’ premium growth and profitability, and the loss of passporting rights, which means UK insurers can no longer underwrite risks from EU states without authorisation.

MBD reported decade-high growth in GWP in 2017, following the initial uncertainty from the result of the EU referendum in 2016, as companies attempted to protect themselves against any short-term economic hit.

This growth continued over the next couple of years as Brexit uncertainty remained with no exit deal agreed in Parliament until the end of 2019, when another general election was held, resulting in a majority Conservative government and a confirmed EU exit date of 31 January 2020.

Although there was a Brexit transition period until the end of 2020, the UK and EU agreed a trade deal in December 2020 – with finalised terms subject to EU Member State approval at its next committee meeting.

Between 2016 and 2020, the B2B insurance market recorded cumulative growth of 14% from £15.6 billion to £17.8 billion.

The impact of COVID-19 and Brexit on B2B insurance, and how insurers and policyholders alike will react to the new market conditions.

How the B2B insurance market will adapt to the post-COVID-19 and Brexit environment.

The value of the market in 2021 and beyond.

This update on the impact COVID-19 is having on the B2B insurance industry was prepared on 25 January 2021.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March 2020.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It wasn't until 15 June that non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September 2020, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions.

The UK lockdown ended as planned on 2 December, but the revised tiered lockdown meant that almost all of the UK faced heavy restrictions on social activities. Although all non-essential retailers were able to re-open, foodservice and hospitality businesses still face extremely challenging conditions. The successful vaccine trials, however, show that there is a path out of the crisis, and the first UK vaccination was administered on 8 December.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021, and 6.6% in 2022. GDP is not expected to return to pre-COVID levels until the fourth quarter of 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.

The current uncertainty, however, means there is wide variation on the range of forecasts, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP does not recover until Q3 2024.

From the start of the outbreak, we have assumed that an effective vaccine would not be widely available until well into 2021. On 9 November, Pfizer and BioNTech announced highly encouraging results from trials of their vaccine, followed by similarly positive results from Moderna and the AstraZeneca/Oxford trials.

The first patients were vaccinated on 8 December but the full rollout will take many months, meaning that Mintel is still assuming that we will be living with COVID-19 for some time to come.

As has been case throughout the pandemic, market conditions are changing from month to month, and we will be publishing a full overview of the impact it has had in our "COVID-19: A Year On" report, due to publish in April 2021.

B2B insurance describes the buying and selling of commercial insurance between an insurer and business. This excludes ‘personal lines’ insurance policies tailored towards private individuals, and instead includes ‘commercial lines’ policies.

The following types of insurance, and their respective commercial aspects, make up a large segment of the B2B insurance market and are quantified in this Report:

Property

Motor

Liability

Private medical insurance

Marine, aviation and transport

Trade credit

Other terms used in this Report include:

(Insurance) Claim: A formal request to an insurance company asking for a payment based on the terms of an agreed insurance policy. The company reviews insurance claims for their validity and then pays out to the insured or requesting third party once approved.

Claims ratio: Claims incurred, including claims adjustment expenses, divided by net premiums earned and expressed as a percentage.

Combined operating ratio: Claims incurred and operating expenses in relation to premiums earned, expressed as a percentage.

Credit default risk insurance: The use of a financial agreement – usually a credit derivative such as a credit default swap, total return swap or credit-linked note – to mitigate the risk of loss from default by a policyholder.

Direct premiums written: The sum of the total policy premiums, net of cancellations, associated with policies underwritten and issued by the company’s insurance subsidiaries.

Expenses ratio: The ratio between operating expenses and net premiums earned, expressed as a percentage.

Fraud repudiation rate: The percentage of fraudulent claims by policyholders that insurance companies then use to dispute the future validity of the contract between themselves and the fraudulent company, which leads to premiums no longer being paid by the company in question.

Frontier markets: Countries with investable stock markets that are less established than those in emerging markets.

Gross claims incurred: The sum of paid claims and change in provision for claims outstanding. This includes the claims costs for insured events during the year, regardless if they have been paid during the same year or not.

Gross claims paid: The total payments made to policyholders named on insurance contracts or to an unnamed third party.

Gross debt: The sum total of debt obligations by insurers or other companies.

Gross earned premiums: The value of gross earned premiums collected by organisations as of the end of the reporting period without any deductions, such as commissions and other expenses. The figure is the GWP plus the difference between the unearned premiums at the beginning of the reporting period and the end.

Gross written premiums: Premium income accepted during the year, which is quoted gross of reinsurance ceded, but net of reinsurance accepted.

Hard market: When the insurance market, during the insurance business cycle, is characterised by high demand and low supply. When growing demand for insurance increases more rapidly than the available supply of insurance, the outcome is a hard insurance market. In this type of market, insurance is generally more difficult for buyers to obtain. Buyers are also more likely to experience high insurance premiums and steady rate increases, which is why this phase of the cycle is known as a ‘seller’s market’.

Home-foreign business: Insurance written in one country on risks located in another country. Premiums and losses are usually payable in the country where the insurance is written.

Insurance broker: An independent agent who represents a buyer of insurance, rather than the insurance company, and tries to find the best policy for the buyer by comparing different insurers’ services.

Insurance policy: Where considerable insured risk is transferred from policyholder to an insurance company.

Liquidity: The degree to which an asset (policy) can be bought or sold in the market without it affecting the asset’s (policy’s) price. Assets (policies) that can be easily bought or sold are known as liquid assets.

Lloyd’s Market: A market in which independent insurance underwriters join together in syndicates to sell insurance, mainly through brokers, under the umbrella of the Lloyd’s brand.

Net written premiums: Premium income net of reinsurance ceded but gross of commission and excluding premium tax.

Non-life insurance: Primarily used to protect a business’ financial investments, such as property, image and other items of monetary value, and ensure that assets are safely covered for investors. A number of regulations and guidelines pertain to non-life insurance items, all of which vary based on the customer’s specific situation.

Premiums earned: The portion of GWP that pertains to the financial year, meaning premiums written adjusted for changes in the provision for unearned premiums.

Reinsurance: The cover insurance companies can purchase to protect themselves against large losses or an unexpected aggregation of losses.

Risk management: The process of identification, analysis, and either acceptance or mitigation of uncertainty in investment (insurance policy) decision-making.

Soft market: A soft market is often referred to as a ‘buyer’s market’ as insurance is usually easier for companies to obtain. Rates are typically lower because competition between insurers is greater, and they tend to adopt more lenient underwriting standards to secure prospective customers and retain existing clients. As a result, this type of market can lead to significant underwriting losses for insurance companies.

The London Market: Specialty commercial insurance and reinsurance business backed by London capital, plus business controlled by, but not written by, London Market participants.

Total outgoing payments: The total expenditure of an insurer in relation to any class of insurance business, comprising the cost of claims and the insurer’s business expenses, including any commission paid to sales staff, brokers, or intermediaries, together with amounts set aside for reserves.

Underwriting: The risk assessment and pricing conducted when insurance contracts are drawn up.

Underwriting ratio: The ratio between total outgoing payments and net written premiums, expressed as a percentage.

Underwriting result: The profit or loss achieved by an insurer or insurance underwriting activity, calculated as premium income minus the cost of claims and the insurer’s expenses in connection with that business. It has been common for insurers to make underwriting losses since they also receive investment income, which generally offsets the underwriting loss.