Proactive strategies needed to deal with tough US market conditions, says Brown & Brown

The US property market in 2021 is expected to see substantial rate and deductible increases, reductions in capacity, coverage restrictions and insurers exiting high-risk business segments, according to Brown & Brown’s Market Trends Quarter 1 2021. However, Brown & Brown says in the report that 2021 will create opportunities for insureds to strategically differentiate their risk in this challenging marketplace. “As companies grapple with the realities of the property market, many are developing proactive strategies to achieve the best outcome for their 2021 renewal.” It continues: “This proactive approach includes preparing a comprehensive submission with complete COPE information, current asset valuations, business interruption worksheets, complying with loss-control recommendations, and a longer-term strategic risk improvement plan. It is also wise to engage senior leadership in expectations around budget, programme structure alternatives, and ROI to include recommended CapEx risk improvements.” The report notes that it is a similar story for casualty with upward rate pressure and restriction of capacity, especially for the directors and officers (D&O) and cyber markets. It says workers compensation remains a bright spot, with rates remaining relatively stable, but warns that increased rate pressure is anticipated in 2021. There are a number of trends driving the tough conditions in the commercial insurance casualty marketplace, according to Brown & Brown. It points to nuclear verdicts and negligent entrustment, “with lawsuits typically seeking damages and punitive awards because the organisation did not follow its driver and hiring standards by entrusting someone who is reckless or inexperienced”. As for workers compensation, the report states: “As we enter 2021, insurance carriers continue to evaluate the workers compensation loss trends associated with Covid-19. Early findings show that the average severity of a Covid-19 workers compensation claim is low. The frequency has increased but is lower than expected during the first eight months. Concern remains over the longer-term impact, including occupational disease/lung damage. In general, workers compensation rate changes have not significantly changed year over year, but rate pressure is expected. Presently, workers compensation rates are averaging about a 1% increase.” Umbrella pricing has increased on average 22.9%, compared to 3.3% two years ago in the fourth quarter of 2018, according to the Council of Insurance Agents & Brokers. Brown & Brown notes that social inflation and nuclear verdicts continue to be cited as contributing factors to umbrella and excess pricing, and reduced capacity and increased pricing continue to be the trends for businesses of all sizes. D&O and cyber are the two most distressed lines. “The public D&O market continues to harden, with no end in sight. After many years of competitive pricing, a surge of D&O claims since 2017 has resulted in continued rate increases that are upward of 40% or more. Depending on the business sector, rate increases can be in excess of 100%. In addition, there is continued pressure to reduce limit capacity and increase retentions by most carriers,” the report states. It adds that the cyber market has continued to harden and this trend is likely to continue for the foreseeable future, with most insureds experiencing rate increases of 20% to 40%, though certain industries are likely to experience much higher increases, sometimes exceeding 100%. Buyers with large excess towers may experience changing carrier appetites and increasingly strict standards for excess rates and pricing per million of coverage. As for international casualty programmes, Brown & Brown says that a majority of US multinational companies continue to see stability for rates. It notes that global litigation continues to be slower than the US, and so rates remain stable due to a competitive marketplace. The report explains that company size and marketing continue to impact renewal rates. “Recent renewals on middle-market multinational casualty programmes have experienced flat rates, with some pressure to increase rates depending on the insurer. Larger multinational casualty programmes are highly dependent on loss history,” it states.

Proactive strategies needed to deal with tough US market conditions, says Brown & Brown

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