US market shows ‘demonstrable improvement’ going into 2023: WTW

A brighter picture for risk and insurance managers in the US has appeared in the second half of 2022, according to WTW, with improved pricing conditions, coverage and capacity for many commercial lines of business. In its Insurance Marketplace Realities 2023 report, WTW says the market isn't soft but shows “demonstrable improvement” for buyers, with the exception of commercial property. But the broker warns of the upward pressure that several macro factors may have on rate, not least inflation in its many forms. Another macro factor is hurricane Ian, says WTW. “With retail insurers making immediate adjustments to catastrophe capacity and rate, reinsurers are telegraphing grim renewal conditions for 2023, which would compound the rate and structural pressures we experience today," it warns. Product lines WTW provides rate predictions for 2023 for various product lines, with property, cyber and political risk showing big increases and other lines generally flat to up 5% to 10%. On the property side, premium increases for most insureds will be driven by inflationary construction costs, heightened reinsurance pressures and possible catastrophe capacity constriction. Asset valuation will be the key topic of conversation in 2023, says WTW, which is predicting cat-exposed rates increasing by 15% to 25%, and cat-free from 10% to 15%. General liability rates in the US are expected to be flat to up 10%, auto liability up 3% to 10%, and workers compensation down 5% to flat. WTW says workers compensation continues to provide underwriting profit, maintaining a steady primary casualty marketplace. Increased capacity and pricing adequacy have started a shift in pricing competition for umbrella (low/moderate hazard -2% to +5%) and excess liability (low/moderate hazard -10% to +5%). But the broker warns that high-hazard risks are still seeing modest increases and coverage restrictions (umbrella high hazard flat to +10%, excess liability high hazard flat to +10%). It adds that perfluoroalkyl and polyfluoroalkyl substances, and other forever chemicals, are driving underwriting concerns and therefore additional questions and potential limitations of coverage across a wide array of businesses. As for international casualty, WTW says the market remains healthy and competitive, with ample capacity made available from carriers who continue to invest in tools and resources to deliver solutions to insureds. Cyber risk continues to see big increases but with signs of moderation. The third quarter saw rate increases of 25% to 50%, while in Q4 rates are flat to up 25%. “An increased level of competition from cyber underwriters eager to write new business following the recalibration of cyber rates last year has led to more nominal rate increases when organisations can demonstrate good cybersecurity controls year over year,” says WTW. For D&O, increased capacity from newer market entrants and an improved securities litigation environment continue to drive more competitive market dynamics. For stable risk profiles, public companies are seeing -7.5% to +2.5% on the primary side and -15% to flat on excess layers. Private and not-for-profit companies are predicted to see -10% to +7.5%, while Side-A and DIC are expected to see -15% to flat. The employment practices liability market is still seeing some rate increases, says WTW, but competition is keeping these modest unless there is significant loss history and/or significant change in exposure factors. Rates are flat to up 10% for primary in domestic US markets, and up 2.5% to 10% for Bermuda markets. Political risk insurance (PRI) is another line still seeing big increases in pricing. “The continuing reverberations of the crisis in Ukraine have drawn increased multinational corporation interest in learning about PRI and, in many instances, putting together PRI programmes as they grow increasingly concerned regarding political volatility caused by food insecurity and increasing tensions between the west and China,” says WTW. It predicts host-country sub-limit increases in sensitive countries of up to 45%, and between 15% and 25% for new programmes excluding China, Taiwan and Turkey, with higher rates for programmes including those countries. Current political/economic conditions and conflicts around the globe are helping drive up pricing for political violence and terrorism insurance. For non-volatile territories, increases are in the range 10% to 20%, says WTW, while for those with major volatility and/or widespread risk of major incidents, up 30% to 40%. Political violence cover in non-volatile territories is predicted to see rates increase 20% to 30%, while for major volatility and/or widespread risk of major incidents 50% or higher. Trade credit insurers remain braced for higher claims activity, says WTW: “The combined stressors of the war in Ukraine, high inflation and looming recessionary environments have many trade credit insurance underwriters exercising caution.” Rate predictions are flat for better risks and up 5% to 10% for poor risks.

US market shows ‘demonstrable improvement’ going into 2023: WTW

Not a soft market but brighter picture on pricing and conditions

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