• Insured losses may rise if shipping delays and higher prices last longer or intensify. 
• Some insurance sectors, such as renewable energy, are bearing a higher burden from supply-chain pressure on loss costs.  
• Supply chain disruption intensifies demand for businesses to have the correct business interruption insurance cover in place.
• The most common actions businesses are taking to de-risk their supply chains are: devel-oping alternative suppliers; improving business continuity management; and identifying and remediating supply chain bottlenecks. (Source: Allianz)

In March 2024, energy inflation was positive for the first time since April 2023, at 0.6%. (Source: OECD) 

In April 2024 the Ofgem Price Cap was lowered to £1690 a year.

An estimated 6 million UK households are in fuel poverty and 2.3 million households are paying more than at the height of the energy crisis because of energy debt. (Source: National Energy Action)

Europe will have to find solutions for the redesign of national energy markets and the compatibility of different energy infrastructures. (Source: Allianz)

Scaling up investment in renewable energy infrastructure and viable alternatives to pipeline gas is essential but will require time. (Source: Allianz)

• The insurance industry continues to be hard hit by the escalating frequency and severity of global risks. 
• Proactive risk management will help minimise the impact of extreme climate related events.
• Physical damage and business interruption are the two direct impacts of climate change businesses fear most. (Source: Allianz)
• Mitigating the impact of the energy crisis will require a coordinated fiscal policy response. (Source: Allianz)

Extreme weather events resulting from climate breakdown will lead to widespread UK food shortages and increased prices in 2024 and 2025.

Due to record rainfall across the UK, many farmers have not been able to plant potato, wheat and vegetable crops during the spring season. Of the crops that have been planted, many are of poor quality.

Supermarket shortages will continue in 2024 as a result of climate related disasters. 

• A systemic shock to global food supply could trigger significant claims across multiple classes of insurance.
• Businesses will need to make sure they lessen the financial impacts of claims made as a direct, or indirect, consequence of food shortages, and adjust their insurance cover accordingly. 
• When food shortages occur, risks relating to terrorism and political violence, political risk, business interruption, marine and aviation, agriculture, product liability and recall, and environmental liability increase, and these will impact insurance premiums.

The cost of construction materials fell in the 12 months prior to March 2024.

Although the price of materials has fallen, construction activity has stagnated due to low market confidence and the threat of liquidation. 

However, despite the general fall in costs, 2024 also saw notable increases in the prices of some materials such as flexible pipes and fittings (up by 20.6%), metal doors and win-dows (up by 17.4%), and ready-mixed concrete (up by 12.4%). (Source: C-link)

• As the cost of some materials falls, insurers may reduce customers’ insurance premiums.

Construction output will fall by 5.3% this year but grow in 2025 (by 3.8%). (Source: Currie Brown)

Tender price inflation across regions is expected to average at around 3.0% in 2024. (Source: Currie Brown)

In the light of continuing economic uncertainty and tightening credit conditions, construction activity in Europe will contract by 2%. However, it’s expected that there will be growth in Ireland due to a rise in housing completions. (Source: Building)

The goal of constructing 300,000 homes remains a priority for both major political parties. Numerous trades within the sector, including Civil Contractors, Roofers, and fit-out companies, stand to gain from these initiatives. (Source: Allianz)

Critical shortages in key building materials like bricks and concrete blocks are causing project delays.

• Construction firms need to have the correct business interruption insurance in place to cover them in the event of stalled or delayed projects.
• Materials with a higher carbon number may be more expensive than traditional materi-als and this will need to be considered when setting insurance premiums.
• Insurance companies need to factor in the costs of replacement materials that are less carbon intensive.

The UK’s used car market had the strongest start to a year since the pre-pandemic levels of 2019.

Used car transactions have risen in every month of the year to date but this quarter’s transactions remain lower than pre-Covid levels.

Increasing numbers of battery electric vehicles (BEVs) are now entering the used sector.

New EU CO2 emission standards will be coming into effect next year and there will be a pressing need for more electric vehicles in Europe. (Source: Allianz)

• The average price paid for comprehensive motor insurance in the UK was about a third (33%) or £157 higher in the first quarter of this year than a year earlier. (Source: The Guardian)
• The average price paid for motor insurance continues to rise, driven by record increases in the cost to insurers’ pay claims.

First-time buyers are facing the toughest borrowing conditions in 70 years. 

Private rental costs in the UK have risen by 9.2% in the last year. (Source: BBC News)

Property portfolios have been impacted by climate related catastrophes such as flood-ing, hail, wind, and freezing temperatures.

Supply chain challenges and rising inflation continue to impact the commercial property sector. 

Average two- and five-year fixed mortgage rates have risen by 0.11% and 0.09% month-on-month respectively. (Source: Mortgage Solutions)

• Allianz Economic Research – Allianz global research analysing economic and industrial developments.
• Underinsurance – Resources, information and guidance to help customers understand the issue of underinsurance.
• Ludonomics – Ludovic Subran, Allianz Group’s Chief Economist, publishes a weekly update on Allianz markets, macro, sector and insurance.