First quarter to see pockets of hard market continue in the US, says Amwins

US insureds will see pockets of the current hard market continue throughout the first quarter of 2022, as the market continues to respond to the changing business landscape and as Covid lingers, supply chains struggle and legislation necessitates adjustments for many industries, according to Amwins. In its report, Looking Ahead: Amwins Q1 2022 Pricing Guidance for Key Industries, the broker examines various lines of business and key industries to see what can be expected in terms of pricing and terms and conditions in the early part of 2022. Property and casualty Amwins expects to see a controlled rate increase into 2022, and while challenged classes and perils will continue to see more increases, accounts with better risk characteristics should experience flat to moderate increases. “The current hard market is an anomaly. Typically, we would see tight capital priced accordingly. In the current situation, however, there is capital to be deployed but it’s not realising adequate returns for investors. To control this, carriers are reducing the amount of limit deployed in high hazard classes, locations and perils, as well as simply exiting classes of business,” it notes. It adds that 2021 was another tough year for property losses, with major nat cat losses, while attritional losses have not abated and remain at record highs. And it notes that a further constricting of underwriting guidelines and terms and conditions will adversely affect clients in 2022. It has also been a tough few years for casualty lines, with 2020 presenting the hardest market in 18 years, according to the broker. Much of the disruption has been in the excess liability space, where carriers decreased limits, raised attachment points and increased rates to levels not seen in decades. “While we have seen some deceleration of rate increases, make no mistake, rate is still needed in the excess space, especially in distressed classes such as public entity, transportation, wildfire-exposed risks and Florida condo construction,” says the report. It goes on: “An influx of new capacity in 2021 in the form of new carriers and MGAs/MGUs may have tempered pricing in the marketplace, but capacity has not had a major effect on rate. Mainly, the new entrants have provided brokers with the capacity to fill out casualty towers, which was difficult in 2020. We anticipate capacity [will] continue to enter the marketplace in 2022, but not at the pace it did in 2021. Overall, the casualty market will continue to be a challenge in 2022, with submission activity and gross written premium at an all-time high in the E&S marketplace.” Other lines Professional lines rates have been relatively stable since the start of the pandemic, apart from private and public primary D&O rates, which continue to rise at a slowing rate and are expected to remain in the 5% to 10% range in the first quarter of 2022, says Amwins. Excess D&O rates are starting to flatten and decrease after two years of increases. As for cyber, despite rapid acceleration of rates during the past year, carriers haven’t yet seen the improvement in profitability needed to stabilise rates, the report notes. It says many accounts can expect 50% to 100%-plus rate increases in the first quarter of 2022, but rates may begin to level after carriers have experienced a full year of rate adjustments. Initial public offerings and special purpose acquisition company policies continue to see “astronomic” premiums and Amwins says increases are more likely due to the continued frequency and severity of securities class actions following public offerings. For healthcare, Amwins is seeing single-digit rate increases for preferred risks, but accounts in tougher venues and those with a poor claims history are seeing large rate increases on renewals, and it expects this trend to continue into the first quarter of 2022. For construction, tides are slowly beginning to turn, says the broker, with more carriers entering the market and aggressively bidding both primary and excess business. “Rate increases have begun to soften throughout the US and while we may still see a 5% to 10% firming in the first quarter of 2022, rates are expected to continue to stabilise on accounts that have a good loss history,” it says. The report notes that energy markets are “hardening more slowly” thanks to increased flexibility from underwriters and more competition in the market, but capacity remains somewhat restricted. It says downstream property is still expected to see stable rate increases for the coming six months, while midstream will continue to decelerate due to the pressure from both upstream and downstream carriers targeting the class. Environmental liability costs continue to rise, says Amwins, and rates will depend on the class of business and identified exposures. For example, businesses such as oil pipelines and certain chemical classes are hardening, and site pollution also continues to see terms tighten and price increases around mould claims. Rate changes for public entities are being influenced largely by loss history and self-insured retention, as well as carrier capacity in the cat portfolio. And finally, Amwins says real estate accounts are likely to experience controlled rate increases between 7.5% and 15% during the first quarter of 2022.

First quarter to see pockets of hard market continue in the US, says Amwins

Broker’s pricing guide for key industries sees moderating price increases

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