You might expect that the general slowing down of global trade and economic activity as a result of the Covid-19 pandemic would have translated to a reduction in our activity across the specie market, particularly due to our traditional focus on Cash in Transit and General Specie. But this has simply not been the case.

In fact, the specie insurance market became, and continues to be, more hectic than before, with an increase in new submissions as brokers compete for business and look to get fair value for their clients. There has also been a race to quality, with brokers looking to place business with reputable – and economically solid - carriers.

For the specie operation at HDI Global Specialty – including our teams in Stockholm (serving the London market excluding Fine Art), Cologne, Denmark and Rotterdam – this uptick in activity saw our gross written premium income increase by almost 40% between 2019-2020. And there are few signs at the moment that business activity will slow down any time soon.

Some of this growth in the specie market can be accounted for by an overall hardening of rates, something which started in earnest last summer following a similar, if more pronounced trend in the cargo insurance market. We have also seen automatic increases of 5-10% at the most recent treaty reinsurance renewals and as a result it is unlikely there will be any downward movement in rates this year at least.

The majority of the increase in our GWP has however been driven by new business and increases in line size at renewals. In order to take advantage of this burgeoning sector we have now also increased our maximum exposure for single risks from Euros 40 million to Euros 75 million, enabling brokers to place larger lines for specific risks with us.

This rise in activity has also been accompanied by increasing clarity and market conformity over certain exclusions. The two key exclusions are for cyber cover and for non-communicable diseases. The former was driven by the wider broking and underwriting market following a push in 2019 for clauses with a clear interpretation over affirmative or non-affirmative cyber cover. The now, almost universal exclusion in the London market for non-communicable diseases was largely driven by reinsurers.

Cash in hand

Looking in particular at the Cash in Transit market, which traditionally commands the higher premiums you would associate with a higher volatile risk, there has been little overall change, to date, in market conditions.

From a claims perspective, the CIT market has in fact remained fairly stable with no real changes to the frequency of major claims related to heists – either by lone-gunmen as is typical in the US, or from organised criminal gangs such as often occur across South America and in mainland Europe. The frequency of these major claims is also not expected to be impacted by the wider economic climate – however we do anticipate potential increases in smaller claims around the world.

For example, in the US we have already seen an increase in attacks on ATMs that tie in with raised levels of civil commotion around the last presidential election and increased tension around racial injustice. There is also potential for an increase in infidelity losses across India – where employees steal small amounts over a long time from their employers – if financial times get tough, although this may be headed off by the impending tightening of security as a result of new regulations from the Royal Bank of India.

Looking further ahead, there is also the ongoing debate over whether cash is dead and becoming obsolete. In Europe it may feel like the use of cash is on the wane, however, in the majority of Europe cash is increasing in circulation in relation to the level of Gross Domestic Product, with a few exceptions – including Sweden. This increase in cash is primarily due to the pumping of money into the economy through measures such as Quantitative Easing.

In some countries the use of cash is also definitely still king. This includes the US where many live outside of the banking system due to the relatively high cost of having a bank account, and in Africa where the lack of a consistently stable banking system has ensured to date that cash is still prevalent.

Overall, the Specie Market remains a key area of focus and growth for HDI Global Specialty despite potential headwinds from the wider economic fallout from Covid-19. In fact, there are many exciting opportunities for continued growth across all the lines we cover, including, for example, the opportunity for us to expand business in the precious metals, diamonds, jewellery and gold storage sector as companies and countries look to protect their more stable assets.