North American liability rates to harden further in surprise turn of market: Willis

Insurance buyers in North America will pay higher commercial insurance rates next year with some lines reaching double-digit increases, according to Willis Towers Watson’s Marketplace Realities 2019 report. Willis says hype about property rate increases following heavy catastrophe losses in 2017 masked where the real increases have pushed through – casualty and professional liability lines. “After the Harvey, Irma and Maria trio of storms of 2017, the last believers in the old hard market/soft market cycle have likely stopped waiting for the loss events that will dramatically turn the market,” commented Joseph Peiser, head of broking for Willis Towers Watson North America. Instead, he said, rate rises in most liability lines of business have “seemed to sneak up on us”, driven by losses and “catastrophic liability” from issues ranging from the Californian wildfires to the opioid epidemic and the #metoo campaign. Overall, casualty rates are expected to range from flat to up 4%, Willis says. The highest rates will be felt in auto liability. Here, premiums will increase by 6% to as much as 12%, as insurers continue corrective pricing action. Soft rates in workers’ compensation make it one of only two classes certain to see rates fall in North America, according to Willis. General liability rates are forecast to be flat to up 4%, umbrella cover flat to up 6% and excess liability flat to up 2%. Liability rate increases and a surge in mergers and acquisitions among insurers are the two key drivers impacting today’s market conditions for buyers, Mr Peiser said. Overall, Willis says 14 lines of commercial insurance are forecast to push through higher rates in 2019 and only two lines – international casualty and workers’ compensation – are certain to record rate reductions. Underwriters have been pushing through property increases since hurricane-led losses in 2017 and Willis says this will continue, with rates set to run up 10% or higher for commercial property affected by heavy catastrophe losses, and between 2.5% and 7.5% for catastrophe-exposed accounts. Non-cat-affected property rates will range between flat and up 2.5%. Willis says heavily loss-impacted US states such as the Carolinas, Florida, Georgia and Texas are likely to see tougher renewals, especially for buyers who experienced losses in 2017 and 2018. The broker says buyers have in part been protected from higher increases by the availability of alternative capacity, which has been replaced in full since the 2017 catastrophe losses. “The influx of alternative capacity has created a more stable environment, with less volatility following industry losses,” Willis says. In addition, Willis says this year’s major hurricanes, Florence and Michael, will “not be significant market events” to change the current ratings environment. Willis says M&A deals between insurers and brokers are largely “good news” for buyers and to date, mergers have not had a negative impact on capacity or pricing. Mr Peiser said consolidated insurers that emerge from recent M&A deals will offer more products to buyers, greater geographic scale and efficiencies. Willis expects further M&A activity into 2019. Despite ultimately fewer insurance providers, Willis says buyers will not be adversely affected. “Given the capital fluidity that is the industry’s ‘new normal’, we don’t foresee a dramatic impact on rates, but we do expect that consolidations will result in more underwriting discipline, which may serve as a backstop against another freefall in rates,” it says. Willis: Commercial insurance rates – going up Auto +6% to +12% Cargo Flat to +15% Casualty Flat to +4% Directors and officers Flat to +5% Employment practices liability Flat to +5% Energy Flat to +10% Environmental Flat to +15% Errors and omissions Flat to +5% Marine Flat to +15% Political risk Flat to +5% Product recall Flat to +5% Property Flat to +15% Senior living and long-term care +5% to +30% Trade credit Flat to +5 Willis: Commercial insurance rates – going down International casualty -5% to -10% Workers’ compensation -4% to flat Willis: Commercial insurance rates – mix of ranges Aviation -10% to +10% Cyber risk -3% to +5% Construction -5% to +20% Fidelity and crime Flat Fiduciary -5% to +5% Healthcare professional liability -7% to +10% Kidnap and ransom -5% to +5% Surety Flat Terrorism and political violence Flat

North American liability rates to harden further in surprise turn of market: Willis

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