Cautious optimism for North American insurance buyers, says WTW

There are signs of cautious optimism in the North American insurance market and while the economic outlook for 2023 remains predictably uncertain, the insurance market is, for the most part, telegraphing positive signs for our buyers, according to WTW. In its Insurance Marketplace Realities 2023 Spring Update, WTW points to two positive areas: D&O and cyber. The broker says that the strong financial market in the last few years has mitigated D&O claims activity, “and insurance carriers are aggressively pursuing market share, which is helping drive down pricing at rates unseen in more than a decade”. As for cyber, it is seeing new capacity pursuing growth, “and while just a short period ago one could expect 50% (or more) rate increases on their programmes, we’re now seeing those same programmes renew with flat rates”. The report notes that market stabilisation is continuing in 2023, largely due to fewer companies paying ransoms, a reduction in overall cyber claim activity, and improved controls by insureds. But the general property and casualty market appears to be in what the broker calls “a state of unsettled disagreement”, as it continues to be a “tale of haves and have-nots”. The latter is property insurance that is lacking cat capacity. WTW explains that the January reinsurance renewals, with higher premiums, bigger retentions and limited capacity for cat coverage, has resulted in the retail property market being drawn into a hard market. But it adds that there are signs that reinsurance capacity may be more abundant come July, and primary capacity is still abundant, though deployment of that capacity has changed. Nevertheless, pressure to obtain higher returns for deployment of catastrophe capacity/aggregate will drive premium increases for insureds while inflationary pressure, reinsurance optimisation and persistent scrutiny on valuation of assets remain, says WTW. WTW’s rate predictions are as follows: Property: (challenged occupancies) +25% to +40%; (non-challenged occupancies) +10% to +20. General liability: -3 % to +5%. Automobile liability: +5% to +10% Workers’ compensation: -5% to +2% Umbrella liability: (high hazard/challenged class) flat to +15%; (low/moderate hazard) flat to +7.5% Excess liability: (high hazard/challenged class) flat to +5%; (low/moderate hazard) -5 to +5% D&O: (public company – primary) -10% to flat%; (public company – excess) -10% to -15%; (private, not for profit – overall) -15% to -10% Cyber: flat to 10% Terrorism and sabotage: +15% to +40% Political violence: +25% to +45% Looking at certain specialty classes, WTW notes that for construction, although rate decreases on renewals are still rare, it is experiencing positive trends in renewal pricing for contractors that it expects to persist throughout 2023. For energy, there has been a re-hardening for downstream energy and the current hardening dynamic cannot be sustained indefinitely for upstream energy, says WTW. The environmental insurance market should experience steady yet cautious growth in 2023 while continuing to face the headwinds of increased claim frequency and severity, regulatory and economic uncertainty, and emerging exposures. On the marine hull and liability side, the market remains firm with demand for price adjustments across the board, at the higher end of range for challenging risk exposures, while for cargo, marine insurers continue to push rates but not to the extent that was seen between 2018 to 2021. Pricing in the ART market is generally stable due to embedded risk financing, says WTW, and structured and parametric solutions will drive the ART market in 2023. As for captive insurance, while there is now less consistency in insurance rate movements than in the previous period, some difficult areas remain.

Cautious optimism for North American insurance buyers, says WTW

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