Hard market conditions in fourth quarter highlighted by US broker survey

All lines of commercial insurance continued to be impacted by hard market conditions and Covid-19 in the fourth quarter of 2020, with rates increasing, albeit at a slower rate than in previous quarters, according to The Council of Insurance Agents & Brokers’ (CIAB) Q4 Commercial P/C Market Survey. The fourth quarter of 2020 was the 13th consecutive quarter of increased premiums, with respondents reporting an average increase of 10.7% across all-sized accounts, down slightly from 11.7% in Q3 2020. As with previous quarters, premiums increased the most for large accounts (13.7%), followed by medium accounts (11.7%) and small accounts (6.7%). Q4 2020 was also the third consecutive quarter in which premiums increased for all lines, including workers compensation, the survey notes. Umbrella recorded the highest premium increase, at 21.3%, followed by D&O liability at 14.7% and commercial property at 12.9%. Cyber recorded an average premium increase of 11.1%, the only line to see an increase from the previous quarter, and blamed by respondents on the increased frequency and severity of ransomware attacks. The biggest changes in underwriting were reported for large accounts. According to the CIAB, carriers were “asking for more loss and exposure history, implementing massive increases in retention and premiums, even if the account had good loss performance and reducing limits”. It adds: “Respondents highlighted that the reduction in carrier appetite for lines such as umbrella, commercial property and D&O forced them to build layers of coverage with multiple carriers for their large accounts, making finding coverage challenging.” Ken A Crerar, president/CEO of the CIAB, said: “The worst of the pandemic may have passed but broker struggles continued into Q4 2020. Umbrella and D&O liability posed continued challenges due to a reluctance from carriers to write those risks, and new trouble for cyber emerged following an uptick in costly ransomware attacks in 2020. Brokers should stand ready to help their clients understand and navigate these challenging market conditions and identify new and emerging risks.” Underwriting capacity continued to contract for the most troubled lines, according to the survey. Nearly 90% of respondents reported a decrease in capacity for umbrella, with more than half of those declaring the decrease “significant”, while 78% and 64% of respondents reported the same for commercial property and D&O, respectively. Nearly 50% of respondents also said there was a decrease in capacity for cyber, reflecting the fact that 66% of respondents noted increased cyber claims activity in Q4 2020. Also on the claims, side, the report notes: “The initial rush of business interruption claims continued to taper off in Q4 2020, with only 38% of respondents reporting increased business interruption claims, compared to 62% in Q3 2020 and to the record high of 94% in Q2 2020. However, this was still significantly higher than in Q4 2019 before the pandemic, where only 18% of respondents observed increased business interruption claims.” There was an increased administrative burden in Q4 2020, as carriers requested far more information than usual, according to respondents. One respondent from a mid-sized southeastern US firm said: “Underwriters were really drilling down more into what the companies do and how they operate. Managers were increasingly having to sign off on terms, conditions and pricing. As a result, it was taking much longer to get renewals or options from carriers.” Respondents also stressed that the impact of the Covid-19 pandemic was still being felt in Q4 2020, particularly in terms of pricing, availability of coverage, renewals and underwriting trends.

Hard market conditions in fourth quarter highlighted by US broker survey

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