A constant prediction for 2021 in insurance is the hardening of the market, but what does this mean? In the insurance industry, we know as hardening of the market, or hardmarket, the process in which conditions become stricter for policyholders, there is less risk tolerance, more expensive premiums and more rigid acceptance criteria. It doesn't sound very pleasant at first, but let's see why it happens.

Typically, an insurer operates with funds that come from premium payments and interest earned on various investments. When the economy is strong, the market is "soft", there is more interest in attracting clients, and selection criteria tend to be looser as expansion is sought. Faced with a crisis like the one we have been through since 2020, it would seem opportunistic for insurers to take a tough stance, but in reality it is a response to maintain the ability to support those who are already insured, rather than trying to expand the customer base. It is a cycle, in the end there is a balance generated between selectivity of criteria and the price paid for insurance.

What should be done in this scenario?

The best idea is to approach your insurance advisor and together come up with a scheme that is viable in this new context. For example, the main threats that the Mexican Association of Insurance Institutions has identified for this year are: cyber attacks, natural disasters, vandalism and pandemic-related damage.

In such scenarios, a tailor-made plan is preferable, designed with specialists who know your industry and can offer something realistic. It is essential to communicate openly, to rely on objective data and to foresee the renovation in time to cover every detail according to the new conditions.

At Fidex we provide asset protection solutions for companies looking for a flexible and tailor-made service. Contact us to find out about the options that best suit your business.