In May 2020, we issued our market update under very different circumstances. The onset of the COVID-19 pandemic gave way to a steady drumbeat of bad news as entire industries shut down, unemployment skyrocketed and global trade dwindled. Masks evolved into a must-have accessory while social distancing, compulsive hand-washing and working from home became the norm. Our update focused on the potential impact of COVID-19 on the economy, insurable exposures and carrier profitability. As industry professionals, we also speculated about the risks associated with workers’ compensation, general liability, business interruption, cyber, trip cancellation and D&O.
Looking back, it is also instructive to realize how little we actually knew. We overlooked the human aspect of such wrenching change as traditional support systems were torn away and families were suddenly forced to juggle work, education and child care all within the same space. Our clients fought for their very survival and had to adapt and transform their business models on the fly. Despite the best efforts of heroic front-line healthcare workers, thousands died, and many loved ones were left to grieve alone. One year later, it is safe to say that no one has gone through this experience unchanged. More importantly, the world we are all reentering has been transformed. COVID-19 has impacted the way we work, shop, dine and travel, and many of these changes will become permanent. “Normal” looks very different, and this will have long-lasting implications for our clients and the economy as we move forward.
Although COVID-19 is far from eradicated, spring 2021 offers a renewed sense of hope and optimism. Governmental stimulus programs provided an important safety net for the economy and bought time. The U.S. unleashed its scientific and manufacturing capabilities to develop and deploy a vaccine in record time. More than half of U.S. adults are now fully vaccinated, with 165 million people having received at least one dose so far. While challenges still lie ahead, consumer and business confidence rise with each vaccination, and there are clear signs that the economy is preparing to soar.
For all of the positive momentum, however, the insurance marketplace is still struggling with weak investment returns, rising loss inflation and significant weather-related activity. A stronger economy will drive premium growth, but there will be continued rigor around risk selection, terms and conditions, and pricing. A new administration will also usher in a new monetary, tax and regulatory environment while climate change will move to the forefront. Clients will need to look closely at how all of this might impact their organization and examine whether current risk management controls and processes are still adequate.
Although our crystal ball is still a bit cloudy, we are pleased to offer our thoughts around some of the major forces likely to impact our clients and industry throughout the rest of 2021 in the June Lockton Market Update.