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Firm US insurance market expected to last into next year

The hard commercial insurance market of the past two years may have come off its peaks in many lines, but average rates are still expected to increase for the remainder of 2021 and into 2022, insurer and brokerage executives say.

Continued catastrophe losses will drive further increases for many property insurance policyholders and, while pressures on liability lines have been alleviated by the closure of courts during the Covid-19 pandemic, rate hikes are still expected for casualty risks.

Estimates of the size of rate increases vary though, with some executives saying averages will likely be in single-digit percentages, while others still see double-digit hikes ahead.

As first reported in our sister publication Business Insurance, tough lines, such as cyber liability, will likely see sharper increases.

The executives were meeting at the Insurance Leadership Forum in the US. The event was one of the first major insurance market meetings to return to an in-person format since the beginning of the pandemic last year.

Insurance price increases have eased and will likely be about 5% going forward, except for problem sectors such as property catastrophe and commercial auto liability, said Jeff Radke, CEO of Accelerant, a Bermuda-based insurer that operates through partnerships with managing general agents.

Average rates are not decreasing though, he said.

“On the liability side, the old years keep getting worse,” Radke said. “And all the catastrophes are really pushing the property side.” Accelerant, which launched in Europe in 2018 and the US this year, plans to begin operations in Canada next year, he added.

Rates increased by double-digit percentages in numerous markets during the past couple of years but there is now more variation between sectors, said Tracy Ryan, president of global risk solutions North America at Liberty Mutual.

“There’s not one narrative for this market; there’s a lot of micro markets right now,” she said.

For example, property rates are still increasing but the rate of increase depends on the catastrophe exposure, Ryan said.

On average, rates are rising by close to 10%, she explained.

Last year, commercial P&C rates increased by 17% on average and were up by 14% in the first half of this year, said Kristof Terryn, CEO North America at Zurich Insurance.

Increases in the frequency and severity of property catastrophe risks and the rise in secondary peril losses, such as wildfires, will likely continue to drive rate hikes, Terryn said.

In addition, while the rise in the cost of materials may ease as supply chain problems are solved, the increased labour costs will likely be lasting and continue to drive up loss costs for insurers, he said.

“The market will stay hard for a while,” Terryn said.

Rates will continue to increase, especially in tough lines, said Marc Orloff, president of North America field operations for Liberty Mutual’s global risk solutions business in Boston.

“Capacity is still compressed in pockets of the liability market and some financial lines,” he said.

And catastrophe-exposed property business will also see rate increases. “Nobody is seeing relief and rates could be up north of 20% in cat-prone areas, but it depends on the individual risk,” Orloff said.

While new capacity has entered the market, “it’s not been disruptive, it’s been additive”, he said.

In professional liability, rates are increasing by about 5% compared to 2020, said Robert Gadaleta, head of distribution for Hiscox USA.

Healthcare-related professional liability accounts are seeing larger rate increases as claims and exposures from Covid-19 rise, he said.

The commercial US trucking sector, which has seen significant rate hikes for several years, remains tough, said Jamie Reid, chairman of C3 Risk and Insurance Services, a privately owned broker.

Insurers are adjusting underwriting based on individual accounts, and policyholders with “high-performing” accounts can see flat renewals or even some reductions, he said.

Policyholders with average or poor loss records, though, are still seeing increases, Reid said.

Increasing jury verdicts and a rise in the number of claims derived from sub-haulers used by trucking companies are factors driving the increases, he said.

As the hard market comes off its peak, there is more interest in alternative risk transfer structures, said Bruce Denson Jr, president of Cobbs Allen.

Alternative coverages for some D&O and regulatory risks are generating interest, he said.

A growing area of business for Liberty Mutual is shared economy risks, including ride-sharing companies, Ryan said.

The insurer combines teams with personal lines experience and commercial lines experience to handle the business, she said.

“Getting the cars back on the road quickly is critical, and that’s a mindset that our personal lines adjusters have. On the commercial lines side, they understand the large limits,” Ryan said. “It’s a tough business and you need to understand the exposures.”

For further news from Business Insurance, please click here.

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